The terrorist attack on in New York and Washington, DC on September 11 immediately rocked global markets. Japan was especially hard hit, with the benchmark Nikkei 225 Stock Average falling 6.6% to below 10,000, its lowest point in 17 years. And Topix, the institutional benchmark, also crashed below 1,000.
This disaster comes at a particularly delicate time the end of September marks the halfway point of the first year in which banks must value their books wholly on market prices. Japanese banks hold massive positions of equity cross-shareholdings, a legacy of post-war relationships that were inflated to dangerous levels in the bubble economy of the 1980s. The stock owned by Japanese banks is now...
