A “perfect storm” trading crisis has hit Tokyo share prices so hard that, as of today, one in 20 listed Japanese companies has effectively become “free” to any would-be buyer.

It means that the market capitalisation of more than 200 companies is now lower than the value of all the cash on their books.

It is, analysts said, a crisis unique to Japan, where stocks have tumbled for the past six months as investors have fled a nation in deepening political chaos. The ultra-cheap prices of so many shares mean that, in theory, anyone paying cash to buy out one of the afflicted companies could end up with more money after the transaction than before.

One senior broker at CLSA Securities said: “Critics of Japan will cite this as evidence of how dysfunctional the country's capital markets have become. Apologists for Japan will see this as an extraordinary opportunity.”

By some estimates, as many as 47 per cent of listed Japanese companies have a market capitalisation lower than their book value, which is the theoretical cash value if the entire business was to be liquidated. Ed Merner, president of Atlantis Investment Research, said: “Some of these companies have gone down for no reason whatsoever. On the yields of these companies alone, you are talking ‘buy', but what we have is people chucking stuff out at any price. Something is wrong here, but it's a great time for a value investor.”

Most of the companies that have fallen into the valuation void are extremely small, but a few, including Kinki Sharyo, the rolling-stock maker, and Nippon Road, the construction group, are veterans from Japan's high-growth heyday.

While on paper the situation represents a no-brainer buying signal, few are expecting an immediate slew of takeover bids. A large part of Tokyo's unattractiveness as a market has been the difficulty that foreign investors have encountered trying to extract the value that they can see.

Knowing that many high-quality Japanese companies historically have been made cheap by recent market turmoil, last year hundreds of potential takeover target firms installed anti-takeover measures, and corporate attitudes turned fiercely against foreign capital.

Peter Tasker, head of Arcus Investment, said that Tokyo had not experienced anything approaching the present cheapness of equities since the post-1997 financial crisis. He added that waning confidence in Japan was understandable: “Government policy errors have ended every single recovery since the bubble burst, so there is previous form on this one. There has definitely been very little attempt by the Government to support the recovery.”

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