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The global economic crisis claimed its first Japanese financial institution on Friday and the government looked to prop up smaller banks, as Tokyo shares flirted with their biggest one-day fall since the 1987 market crash.

Escalating bankruptcies in the property sector and among small businesses, along with fears of a global recession, have dragged Japan’s export-dependent economy into the crisis, sending blue chip shares sliding by a quarter so far this week.

“This is panic. New York, the currencies — there’s nothing left for us to trust,” said Takashi Ushio, head of investment strategy at Marusan Securities, as the Nikkei share average slid more than 10 percent, following sharp falls on Wall Steet.

“Investors are scurrying to convert to cash. A lack of confidence is coupling with panic.”

As unlisted Yamato Life Insurance Co failed, the government said that to help hard-hit smaller lenders it may revive a bank rescue law from the 1990s Japanese banking crisis (no fax instant cash advance). One newspaper report suggested Tokyo may set up a $100 billion fund.

Fearful selling also sent Hong Kong and South Korean shares down 7 percent while Singapore declared its first recession in six years as the U.S. stock plunge heaped pressure on economic powers to halt a global spiral of financial distress and slowing growth.

Financial policy makers from the Group of Seven major industrial nations, including Japan, are to meet in Washington later on Friday to consider what to do next, as bank bailouts, liquidity injections and interest rate cuts across the world have failed to quell investor anxiety.

After arguing for months that Japan had avoided the worst of the global financial crisis, its leaders acknowledged they were increasingly worried about the stock falls. 

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