ANALYST VIEW: Japan markets rocked as global crisis hits

TOKYO (Reuters) - Tokyo shares headed for their biggest one-day fall since the 1987 market crash on Friday as the global financial crisis claimed its first Japanese financial institution and the government looked to prop up smaller banks.

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.

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KEY POINTS:

-- The Nikkei share average fell 11 percent at one point. It has fallen by about a quarter this week.

-- The yen hit a three-year high against the euro and a six-month high against the dollar.

-- Japan's Yamato Life Insurance Co, an unlisted insurer, failed with $2.7 billion in debt, although government ministers and analysts were quick to play down the risk of contagion.

COMMENTARY

YASUNARI UENO, CHIEF MARKET ECONOMIST, MIZUHO SECURITIES

"The series of media reports so far about what the U.S. authorities may do (on the financial crisis) have reduced the surprise factor, compromising the effectiveness of their moves.

"Whether it is the U.S. president's statement or a joint message with the G7, simply giving out a statement is unlikely to support stock prices for anything more than a few days.

"If the authorities' move turns out to be deemed extensive enough, investors may come back to buy shares.

"The feeling of doubt is so strong among market participants that market sentiment is unlikely to improve until the authorities do what they commit to do and tangible results begin to show."

KAZUHITO UCHIDA, CHIEF ECONOMIST, BANK OF TOKYO MITSUBISHI UFJ

"As the credit crunch is now beginning to threaten the yen short-term money markets and dry up liquidity, the Bank of Japan should play a bigger role as the lender of last resort.

"And to enhance the function of the lender of last resort, the BOJ should consider paying interest rates on reserve deposits that financial institutions put up at the central bank and accepting foreign currency-denominated assets as collateral for its yen supplying operations."