Nasdaq Admits Defeat in Japan

Nasdaq baled out of Japan yesterday after spending two years and billions of yen in a disastrously timed attempt to establish a new venture capital market in the far east with local partner Softbank.

The second-biggest stock market in the United States said it would withdraw from its operation on the Osaka securities exchange on October 15, crushing the company's plans to establish a 24-hour global equities trading system.

The retreat also deals a heavy blow to Masayoshi Son, the Korean-Japanese owner of Softbank who once boasted the biggest share of the world's internet investments, many of which are now worthless.

Nasdaq Japan was conceived during the most expansive phase of the dotcom boom to create a market for start-ups in a country that had long been seen as hostile to venture capital.

The start of trading in June 2000 coincided, however, with a plunge in internet and technology stocks across the world and was soon followed by the Japanese economy's slide back into recession.

This year 16 firms listed on Nasdaq Japan, which has attracted only two-thirds of the 150 companies it targeted.

John Hilley, chairman and chief executive of Nasdaq International, blamed the failure on bad timing and weak mar ket conditions. "We walked into a three-year correction just as we got started. The end is not in sight."

The parent company, which plans to demutualise next year, says it remains committed to its operation in Europe.

"We are marching along as aggressively as we possibly can," said Mike Sanderson, chief executive officer of Nasdaq Europe "It is a totally different environment [in Europe]. There is some fairly robust market activity. What we are all missing is the initial public offerings but they will come back."

Softbank, which held a 43% stake in Nasdaq Japan, said its US partner's withdrawal was "truly regrettable". The pull-out means that Mr Son will have to add at least another ¥1.2bn (£7m) to his company's growing list of failed investments.