The Samurai bond market, until a fortnight ago the world's fastest- growing corporate debt market, has come to a standstill since Lehman Brothers became the first US borrower to default on the securities.

Since then, Britain's National Grid's Gas division, Deutsche Bank and Societe Generale have cancelled planned sales.

The National Grid fundraiser was launched with a fanfare barely a fortnight ago. It had planned to raise 30 billion yen (£152.9 million) by issuing bonds in the low interest rate country.

Today, it emerged the plan had been scrapped.

Samurais, where foreign firms issue debt in yen, had until Lehman's collapse been the only bond market to expand in the subprime crisis.

But Lehman left Japanese investors with 195 billion yen of its debt.

“The Lehman shock is fatal to the Samurai bond market for now,” Koyo Ozeki, Pimco's head of Asia-Pacific credit research said. “Investors believed Lehman and others were too big to fail.”

The effect on the Japanese psyche has been profound.

Tokyo investors still recall Japan's meltdown in the 1990s when debt-laden firms crashed, bringing the economy to a standstill for more than a decade.

As recently as July, Merrill Lynch predicted that Samurai sales could exceed three trillion yen this year.

Japanese observers say costs will continue to rise from the decision by US Treasury Secretary Hank Paulson to let Lehman fail.

“History will prove it would have been cheaper to save Lehman than deal with the cost of failure,” said Pimco's Koyo Ozeki.