Incubator Bank of Japan halts, files for bankruptcy: officials

Government officials stressed that the move would have little impact on the Japanese financial system, however.

Earlier on Friday, the Financial Services Agency (FSA) told the bank it cannot conduct any business for at least three days and must make efforts to protect existing depositors, the FSA said in a statement.

The FSA said it would let the bank go under and will only refund depositors a maximum of 10 million yen (US$120,000). This would be the first time that a cap on deposit insurance had been used in Japan.

The IBJ later filed for bankruptcy at the Tokyo District Court, a court official said.

The Tokyo-based bank may report a negative net worth of 180 billion yen, public broadcaster NHK and Jiji Press reported, without citing sources.

“It's extremely regrettable that the situation occurred. I hope depositors remain cool-headed as up to 10 million yen in deposits will be protected,” Shozaburo Jimi, the minister in charge of financial services, told reporters.

It was the first bankruptcy in Japan's banking sector since 2003. The cap on deposit insurance was enacted in 2002, after a slew of banks went bankrupt following the bursting of the economic bubble in the 1990s.

Officials stressed the failure would have little wider financial impact.

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