TDK's announcement that it would post the loss in the six-month period to the end of September fuelled concerns that other Japanese firms might be in the same situation.

TDK, the world's largest maker of magnetic tapes, said the book value of its holdings of euroyen bonds, which are linked with short-term Russian government bonds, was 14.3 billion yen.

Although they fell due on Monday, it was already known they would not be redeemed because of the financial turmoil that erupted in Russia in August.

A TDK spokesman the firm would set aside loss reserves for more than half of the book value of the bond holdings in the first half of 1998-99, and post an additional special loss in the second half once the total loss was determined."We do not think the loss will affect our mainstay business," he said, adding TDK had noother investments related to emerging markets.

The spokesman said TDK had thought the euroyen bonds, which carried no currency risk, would be a good short-term investment because their 1.7 per cent interest rate was higher than that of Japanese government bonds.TDK, which in May predicted a 2.8-per cent rise in its consolidated net profit to 60 billion yen in 1998-99, said it did not plan to revise its earnings estimates.

Other firms have already issued warnings of special losses, and traders and analysts said more such warnings were likely because of the prolonged confusion in emerging markets such as Russia, which in August effectively devalued the rouble and suspended repayments on some overseas debt.

Komatsu Zenoah Co Ltd, which makes brush cutters and chain saws, revealed earlier this month that it held 791 million yen worth of the same Russia-linked bonds.Aoyama Trading Co Ltd said it would incur a loss of 7.45 billion yen in 1998-99 from writing off foreign government bonds and investment trustsahead of their maturity.

The discount chain store operator said it had a latent loss of 19.95 billion yen on its holdings of government bonds from Russia, Argentina, Venezuela, Brazil and Mexico.

Traders said other cash-rich Japanese companies, fed up with ultra-low yields on yen bonds and fragile Tokyo stocks, faced similar losses after opting to buy bonds in Russia or other emerging markets before the Russian crisis erupted in August.

The sources said Japanese and foreign brokerages had in particular recommended Russian bonds as a short-term investment.

"Russian bonds, along with those in other emerging markets, took the spotlight, especially in 1996 and 1997, with their high returns and relative stable economies," said Hideyuki Takano, an analyst at Daiwa Institute of Research.