Japan Stocks Tumble, Head for 3-Year Low, on Lehman Bankruptcy

By Masaki Kondo

Sept. 16 (Bloomberg) -- Japan's stocks plunged, headed for a three-year low, after Lehman Brothers Holdings Inc.'s bankruptcy filing and tumbling oil prices exacerbated concern credit turmoil will slow the global economy.

Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Japan's largest listed banks, were untraded as orders to sell exceeded those to buy. Aozora Bank Ltd., controlled by Cerberus Capital Management Ltd., was poised to fall after Lehman's filing showed the Japanese bank was its biggest creditor. Consumer lender Takefuji Corp. lost 2 percent.

``Investors can't help but see Lehman's collapse setting off a chain reaction of bank failures worldwide,'' said Mitsushige Akino, who oversees about $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``If concerns about the series of global bank failures linger, the impact on Japan's financial stocks will be bigger than the subprime problem.''

The Nikkei 225 Stock Average sank 344.66, or 2.8 percent, to 11,870.10 in Tokyo. The broader Topix index dived 31.47, or 2.7 percent, to 1,145.73, falling below the March 17 level of 1,149.65, the lowest close since June 10, 2005.

Lehman, the fourth-largest U.S. investment bank, was forced into the biggest bankruptcy filing in history, becoming the latest victim of the subprime mortgage crisis. At least seven Japanese banks lent a total of $1.62 billion, according to the Chapter 11 filing by Lehman. Among the largest unsecured creditors are Aozora, based in Tokyo, and Mizuho Corporate Bank Ltd., a unit of Mizuho Financial.

``We are closely monitoring the moves of Asian markets and trying to figure out how these developments will affect the Japanese market,'' the Bank of Japan's chief press officer Yoshihiro Sugimoto said yesterday.

Crude oil tumbled as much as $2 a barrel to a seven-month low of $93.71 a barrel after refineries along the Gulf of Mexico escaped major damage from Hurricane Ike. The yen appreciated against the dollar to as much as 104.14 today, the strongest since July 16.

Nikkei futures expiring in December retreated 5.6 percent to 11,580 in Osaka and slumped 5.2 percent to 11,580 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.