The worst of the bloodbath might be over, but Tokyo staff at foreign banks are still living in fear of the axe.

Morgan Stanley has been the most vigorous trimmer, cutting deep into its property securitisation team. Lehman Brothers recently closed its profitable Tokyo mortgage subsidiary in an effort to free up cash. And the hit list also includes UBS and many others.

But at least we’ve seen the back of the carnage now, right?

Wrong, according to one recruiter at a Tokyo search firm, who wished to remain anonymous. Employees at all the big i-banks are definitely still twitchy. “I don’t expect companies will lay off big chunks of people, but I think you will continue to see job cuts,” the recruiter says.

David Leithead, Japan managing director of Michael Page International, warns that not all recent redundancies are due to the credit crunch. “Several firms have made redundancies across areas of front office and infrastructure in the past few weeks. Some of these have been attributed to the relocation or redistribution of functions back to the UK or US, or to Asian hubs such as Hong Kong, Singapore and India. Of course it’s arguable that this is linked to the credit crunch, but not exclusively.”

Like other recruiters, however, Leithead says there is still cause for optimism. “Some of the bigger firms are still actively recruiting and we are also seeing a reasonable level of hiring activity across the smaller specialist houses, asset managers, insurers and boutiques,” he adds.

He continues: “There is a sense amongst many companies in the financial sector that this is a good time to seize the initiative and hire quality people from firms where stability or certainty is under threat.”