Japan's central bank pumped a record $184 billion into money markets and took other measures to protect a teetering economy Monday, as the Tokyo stock market nose-dived following a devastating earthquake and tsunami. The benchmark Nikkei 225 stock average slid 6.2 percent in its first day of trading since the 8.9-magnitude quake centred on north-eastern Japan struck Friday, triggering enormous waves that swamped towns and killed thousands.
Escalating concerns about the financial and economic fallout of the disaster triggered a plunge that hit all sectors of the stock market. The broader Topix index lost 7.5 percent.
The Bank of Japan (BoJ) moved quickly to try to keep financial markets calm. By flooding the banking system with cash, it hopes banks will continue lending money and meet the likely surge in demand for post-earthquake funds.
Later in the day, the central bank's nine-member policy board gathered for a shortened meeting and voted unanimously to ease monetary policy. It will expand the size of an existing program to buy assets such as government and corporate bonds by 5 trillion yen to 40 trillion yen ($486.4 billion). It also decided to keep its key interest rate at virtually zero.
Credit Suisse economist Hiromichi Shirakawa estimated the damage at up to 15 trillion yen ($183 billion) and other analysts warned the economy will shrink for two straight quarters.
That represents a painful blow for Japan which lost its place as the world's No 2 economy to China last year. The Japanese economy has been ailing for two decades, barely managing to eke out weak growth between slowdowns. It is saddled with a massive public debt that, at 200 percent of gross domestic product, is the biggest among industrialised nations.
Among the hardest hit on the stock exchange, shares of The Tokyo Electric Power Co plunged more than 23 percent as it faced power shortages and a second hydrogen explosion at a nuclear reactor Monday, sending a massive column of smoke into the air and wounding six workers.
Toyota Motor Corp, the world's biggest automaker, tumbled 7.9 percent after saying it would suspend manufacturing at its domestic plants through Wednesday a production loss of 40,000 cars. Other manufacturers forced to halt production, such as Sony Corp and Honda Motor Co, also slumped.
The four most severely affected prefectures (states) in the north-east Iwate, Miyagi, Fukushima and Ibaraki account for about 6 percent of Japan's economy. Power supply has failed in the worst affected areas and power rationing may be imposed in other regions. Ports are closed, steel plants have stopped producing, and several major oil refineries have shut down. Getting manufacturing up and working again may be a bigger challenge than in the catastrophic 1995 Kobe earthquake because a larger area is affected.
In the north-eastern city of Sendai, the railway station stood deserted. State television footage showed ceilings and walkways collapsed onto the platforms, walls warped and leaning onto the tracks. There was no indication when the station and lines running through could be repaired and operating again. The north-east is also a major centre for car production, with a myriad of parts suppliers and a network of roads and ports for efficient shipments.
The aftermath is being felt nation-wide. Four nuclear plants were damaged in the temblors, causing widespread power shortages. Trains in Tokyo, the nation's capital, usually run like clockwork. But are running on a reduced schedule or stopped entirely, preventing millions of commuters from reaching workplaces. Billions of dollars are expected to be needed to rebuild homes, roads and other infrastructure requiring public spending that will benefit construction companies but add to the national debt.
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