As the current financial crisis worsens in the UK, expectations that Asia’s largest economy would not suffer from the downturn of the economy around the world were crushed as Japan witnessed its first victim of the credit crunch.

Japanese insurance firm, Yamato Life Insurance (YLI) has asked Japans Financial Services Agency for court protection after the firm had collapsed, it has been revealed.

The value of Yamto’s securities holdings had dropped substantially as a result of Tokyo’s share prices plummeting down on Friday.

The insurer is believed to have arrears of $2.7bn (£16bn) and is the first insurer within the Japanese financial sector to have been hit by the credit crisis.

Japan’s Finance Minister, Shoichi Nakagawa stated that the collapse “does not reflect the health of the industry as a whole.” Instead, he blamed the bankruptcy on Yamato Life’s business strategy.

Takeo Nakazono, president of TLI said that the collapse was unexpected.

He said: "Because of the global financial market chaos and the credit crunch, the value of our securities holdings rapidly fell. It was beyond our expectations."

Yamato Life is the first Japanese life insurer to have failed in seven years and the collapse has raised major concerns within other Japanese insurance firms as their confidence fell deeply in what is yet to come as part of the financial crisis.