"The markets digested the news about Yamaichi on Friday," said Malcolm Tulloch, a market forecaster at Tulloch Research in San Francisco. "What everyone now wants to know is whether Hashimoto will commit public funds to shore up Japan's banking system."
Japan's central bank moved quickly to avoid a panic, announcing that it would cover the cost of Yamaichi's liabilities. In response to the news, the yen dipped 1 per cent against the dollar, then climbed back. Wall Street took the news calmly, with the Dow Jones Industrial Average shrugging off the bad news from Japan, closing up 54.46 points at 7881.07 on Friday.
Japan's financial markets are closed for a national holiday tomorrow. Observers say Yamaichi's troubles are unlikely to have a big impact on European and US stocks. "The collapse of an investment bank is a noteworthy event that registers on the radar screen but it's no Kobe," said Charles Crane, the research director with the US fund manager Spears, Benzak, Salomon and Farrell.
Nevertheless, Yamaichi's closure is a further ominous milestone in the unfolding Asian financial crisis which began in July in Thailand, spread to Hong Kong last month via stops in the Philippines and Indonesia, hit Korea last week forcing the International Monetary Fund to prop up Korea's ailing economy with an emergency credit of about $20bn (pounds 12bn), and now appears headed for Tokyo.
Market participants will look for evidence from Vancouver of concrete action by Japan, the US, and the IMF to stop the final and biggest domino in the Asian financial crisis from falling down.Reuse content