The current global credit crisis has led to the collapse of Japan's Yamato Life Insurance with debts of $2.7 billion, making the mid-size insurer the first credit crunch victim in Japan.

So far Japanese banking and other institutions have been unaffected by the US financial crisis and were keen on expanding abroad by making low-priced acquisition of distressed western financial firms just as Nomura did last month when it acquired the Asian operations of Lehman Brothers for $225 million and susbequently picked up the failed US investment bank's European and Middle Eastern investment banking and equities operations for an undisclosed sum (See: Nomura to buy Lehman's banking, equities units in Europe, Middle East) 

Similarly Mitsubishi UFJ Financial Group acquired a 20-per cent stake for $8.4 billion in the troubled US securities firm Morgan Stanley, which along with Goldman Sachs agreed to change its structure from an investment bank to a bank-holding company, in order to stay afloat. (See: Goldman Sachs, Morgan Stanley surrender investment bank status)

Japanese financial institutions are regarded to have been more cautious than many of their European counterparts while investing in risky sub prime assets largely due to their exposure to the 1990s loans crisis.

Yamato Life president Takeo Nakazono bowed his head and said, "We are deeply sorry and offer apologies from the bottom of our hearts,'' at a press conference at the Bank of Japan headquarters in Tokyo  earlier this morning, where he announced that the company had filed for bankruptcy protection.

Nakazono explaine that the company went into the red because of the global financial market chaos stemming from the US sub prime mortgage crisis and the credit crunch, as a result of which the value of Yamato's securities declined $111 million, "which was beyond our expectations".

Most of Yamato's $2.7 billion losses stem largely from stock holding losses related to the US financial crisis and finance minister Shoichi Nakagawa said that the bankruptcy was due to Yamato's particular business strategy, and did not reflect the health of the industry as a whole.

Nakagawa said the main reason for Yamato Life's situation was "its unique scheme", under which the company offset its losses from high-cost insurance operations from the proceeds of high-yielding securities.

Kaoru Yosano, minister for economic and fiscal policy also underplaying the bankruptcy of Yamato,  calmed fears of other Japanese insurance companies being next in the line, saying he was not regarding the failure of Yamato Life as part of the global financial crisis.

However, the credit crunch will cause a number of companies in Japan's real estate sector into bankruptcies.

The Japanese law empowers a court to order assets at troubled financial institutions such as banks and insurers to be preserved.

Founded in 1911 in Tokyo Yamato has1 trillion yen ($10 billion / Rs48,000 crore) in individual policy accounts. The company has filed with the Tokyo District Court to invoke the 2000 fast-track law for its rehabilitation.