Anxiety over Japan's financial system deepened today after a 10-year government bond auction failed to find enough buyers for the first time ever.
The failed auction came two days after the Bank of Japan unveiled a controversial plan to shore up the banking sector.
The 1.8 trillion yen ($14.8 billion) auction of 10-year government bonds, described by one analyst as "shocking", reflected uncertainties over how the Japanese government will respond to the Bank of Japan's unprecedented plan to wade into the stock market.
Bank of Japan Governor Mr Masaru Hayami sought to dismiss fears Japan was sailing into a financial crisis. He said he was not worried about the poor auction and that the bond market was merely correcting after a period of heady gains.
Bond prices have been rising as the central bank has pushed interest rates to near zero in a bid to restore economic growth.
But Mr John Mr Richards of Barclays Capital said "This first undersubscribed auction is remarkable. . . . Ultimately if the government doesn't cover their auctions this raises all kinds of problems - worst of all the possibility of not being able to re-fund existing debt," he said.
Most analysts viewed today's undersubscription as temporary until uncertainty subsides over the government's plans.