JAPANESE CRISIS:YAMATO LIFE Insurance yesterday filed for bankruptcy with 269.5 billion yen in liabilities. It becomes the first direct casualty of Japan's financial sector.
The Japanese life insurer said it was unable to close its books at the half year, after a sharp and rapid fall in the value of its equity holdings left debts exceeding assets by 11.5 billion yen. The medium-sized company's failure is the first collapse of a Japanese life insurance company in seven years.
The bankruptcy came on a day of panic selling in the global markets with the Nikkei 225 average falling 9.6 per cent to close at 8,276.43 - the first close below 9,000 for five years, and the worst one-day fall since a drop of 14.9 per cent on October 20th, 1987.
Yamato's collapse highlights the impact that the global credit turmoil is having on Japan, even as the country has avoided severe liquidity problems.
The company faced losses of 15.7 billion yen on its securities holdings, after having shifted its investment weighting heavily towards alternative investments, which comprised 30 per cent of its portfolio at the end of September.
As the value of its investments fell, the company attempted to shore up its capital by raising funds from third parties but "the credit contraction spread far more rapidly than expected", Takeo Nakazono, president of Yamato Life, said.
"It looks like the precursor of things to come in Japan," said one credit analyst.
(Financial Times service)
