New Japan Securities Co. and Wako Securities Co. have tentatively agreed to merge in April 2000 into Japan's fourth-largest brokerage house, sources said Thursday.

According to the sources, the details of the deal are being negotiated with Industrial Bank of Japan, which is the top shareholder in both of the second-tier brokerages.

According to the sources, the surviving entity would most likely be New Japan Securities and rank fourth behind Nomura, Daiwa and Nikko, with some 9 trillion yen in combined financial assets.

To reduce costs and streamline operations, 2,000 to 3,000 jobs may need to be trimmed between the two. New Japan has some 4,000 employees, while Wako has about 3,100.

However, both securities firms the same day denied the reported merger in separate statements, saying nothing concrete has been decided yet.

The merger would bolster the companies' ability to attract individual customers amid the ongoing "Big Bang" financial reforms, which are expected to spur competition among financial institutions operating in Japan, analysts said.

New Japan Securities has posted unconsolidated pretax losses for four consecutive fiscal years up through last March 31. In 1998, it managed pretax profits of 13 million yen for April-September.

Wako Securities posted pretax profits of 600 million yen for the first half of fiscal 1998 and has shown pretax losses for two consecutive years up to fiscal 1997.

Abolishment of the fixed commission system later this year is expected to deal blows to many of the weaker Japanese brokerages.