There has been a big fall in share prices in Tokyo - the Nikkei average was down by more than 800 points or 5% to bring it close to 15,000 points. This is seen as a danger level for the Japanese banking system which holds shares as security for its loans. Our economics correspondent James Morgan looks at the background:

This latest turn of events exposes the nature of the vicious circle which seems to be dragging the Japanese economy down. On Thursday a major foodstuffs firm, Toshoku, announced it was going to file for bankruptcy.

It is the fourth largest bankruptcy in recent Japanese history. The firm had been desperately trying to stay in business by cutting prices in the face of low demand.

But it received no help from the banks who, equally as desperately, are trying to reduce their bad loans. This puts pressure on companies in which the banking system holds shares.

And the collapse of one firm brings the value of all shares down so the banks see the book value of their collateral decline when they exercise normal banking prudence. They themselves face pressing problems from another quarter as well: In recent months there has been the emergence of what is known as the Japan premium which means that Japanese banks have to pay more for the money they borrow internationally than do their competitors from Europe or the United states.

The Japanese have been determined to squeeze that premium, hence the need to demonstrate they are taking action to reduce bad loans at home.