Financial authorities in Japan and other leading industrial countries were braced to act together today to counteract any instability in world markets arising from Japan's biggest corporate failure.
Following the closure of Yamaichi Securities, the fourth-largest brokerage in Japan, leaders at the Asia Pacific Economic Co-Operation Summit in Vancouver will today discuss new measures to head off the financial crises now threatening major economies in the region, such as Japan and South Korea.
The leaders of the 18 APEC economies around the Pacific Rim spent much of their time grappling with financial upheavals. These have spread from South-East Asian states such as Hong Kong, Indonesia and Thailand - once vaunted as "tiger economies" - to the much bigger economies of South Korea and Japan.
Japan indicated that it would seek to counteract any problems in the Tokyo market resulting from the Yamaichi closure. After days of speculation, the 100-yearold broker confirmed it was closing because of a liquidity squeeze.
Mr Shohei Nozawa, its president, said through tears: "This is heartbreaking."
The closure heightened fears among international investors that recent turmoil in South-East Asia might be spreading to the world's second-largest economy. However, the Bank of Japan said it would provide whatever funds were necessary to support the market.
And the Japanese government hinted that it would support the country's financial system with public money, saying the issue was now subject to "detailed study".
The Japanese Prime Minister, Mr Ryutaro Hashimoto, arrived in Vancouver yesterday morning hours after the announcement of the Yamaichi closure, which resulted from debts of over $24 billion (£16 billion).
On the eve of the summit, South Korea was forced to ask for a $20 billion bail-out from the International Monetary Fund after Japan and the US had refused direct aid.
The news led to near panic trading in Seoul yesterday, where shares plunged by 7.2 per cent to a 10-year low on fears of further corporate closures.
APEC will endorse a plan for emergency action to deal with future crises which will give the IMF additional resources. This plan was drawn up last week in Manila by senior financial officials. Under it, member-states will agree to accept stricter monitoring of their financial systems.
A trade liberalisation package was announced at the weekend as part of the APEC goal of full free trade by 2010.
The expected slump on international stock markets failed to materialise yesterday in the wake of the Yamaichi collapse. Investors were content to sit on the sidelines ahead of the reopening of the Japanese stock market early today.
Trading volumes in most of the major markets were modest and the fall in share prices was, in most cases, less than 2 per cent. Even the hugely volatile Hong Kong stock market failed to react negatively to the news from Tokyo. The Hang Seng Index actually closed marginally ahead.
At the close last night in New York, the Dow Jones Index had fallen by 113 points, a drop of 1.44 per cent.
The London market closed down 1.7 per cent while in Dublin - which traditionally tends to lag behind movements on the major markets - share prices were marked down only marginally and there was no rush of sell orders.