Japan monitors markets as stocks crash for 2nd day following US banks' collapse

The Japanese government on Tuesday said it would keep a close eye on financial institutions here following the collapse of two major US banks which sent a shock wave around global markets amid fears more US banks could be set to fail.

Economy Minister Shigeyuki Goto told a regular news conference that the government was keenly eyeing developments and any adverse effects on Japan's economy, but said in the short-term the impact from the collapse of US lender Silicon Valley Bank was not likely to be major.

Finance Minister Shunichi Suzuki largely reiterated this view, saying separately that he was confident in Japan's banking system weathering the storm, as they have enough strong capital bases and liquidity.

"At this point, we think the possibility of the recent collapse of the US banks leaving a serious impact on the stability of the Japanese financial system is low. The financial system is relatively stable," Suzuki told a press briefing on the matter.

The Financial Services Agency will need to closely watch economic and financial market developments both at home and abroad and monitor how Japanese financial institutions will be impacted, Suzuki said at the presser, following a Cabinet Meeting.

On Friday, California-based Silicon Valley Bank, a major lender to startup businesses, collapsed owing to the US Federal Reserve's aggressive interest rate hikes damaging the value of the bank's bond holdings, with the bank also being hit by a run of deposits.

Global markets were battered by the US banks' failures as investors tried to limit their exposure to financial-oriented stocks and opt for safe havens, market strategists here said.

Amid fears of contagion, Japan's benchmark Nikkei stock index closed down 1.11 percent on Monday, while the broader Topix index dropped 1.51 percent.

As the rout continued Tuesday, Tokyo stocks took a battering again, with the Nikkei marking its biggest decline in three months, tumbling 2.19 percent, while the Topix plunged 2.67 percent, as financial issues continued to be offloaded, brokers here said.