In Japan, the acute pain caused by the financial crisis emerged markedly last autumn in securities markets such as the corporate bond and CP markets, in which large firms, banks, and institutional investors are major participants. After the collapse of Lehman Brothers,  BIS Review 132/2009  3  Japan's stock prices fell sharply and defaults of corporate bonds started to be observed.
In these circumstances, the excessive anxiety of market participants prevailed in the corporate bond and CP markets, and this made investors excessively cautious about taking on issuers' credit risk. In addition, market functioning deteriorated significantly: transactions decreased sharply, and the average market rates did not reflect the market fundamentals but rather were influenced strongly by specific circumstances of individual transactions.