Monday, March 14, 2011

Tokyo Stocks Hammered, BoJ Unleashes Record Funds

TOKYO: Japan stocks tumbled Monday and the central bank poured a record amount of cash in a bid to soothe money markets shaken by Japan's biggest ever earthquake, a devastating tsunami and a nuclear emergency.

Stocks saw a post-quake sell-off with carmakers, banks and electronics firms taking a hit on fears for the economy as power shortages prompted rolling blackouts and plants remained closed in quake hit areas, hitting production.

"There was panic selling in morning trade following the quake and tsunami," said Masumi Yamamoto, equity market analyst with Daiwa Securities Capital Markets.

Tokyo shares plunged 5.95 per cent Monday afternoon with the key Nikkei index slumping below 10,000 to its lowest levels since November, down 610.26 points at 9,644.17.

The Bank of Japan said it would pump a record 15 trillion yen ($184 billion) to help stabilise the short term money market, making good on its pledge Sunday that it would unleash "massive" funds following the quake.

The bank will provide an additional 3 trillion yen Wednesday.

"The Bank of Japan has acted quickly to secure the liquidity of the market and made sure to stabilise it," said Hideaki Inoue, chief manager at forex trading at Mitsubishi UFJ Trust and Banking Corp.

"The yen is coming back to a lower level in response."

The yen briefly touched a four-month high before easing against the dollar on the massive liquidity injection Monday as markets responded to the natural disaster.

It briefly surged to 80.60 against the dollar, the highest since November 9, before retreating to 82.15, where it held steady despite a fresh explosion at the Fukushima nuclear plant Monday.

It was the first time since May, when European sovereign-debt fears pushed up the yen steeply and weighed on Tokyo shares, that the central bank injected same-day funds to boost confidence.

Japan's central bank has said that it stands by to do whatever necessary to keep stability in the markets and financial system.

The BoJ's two-day policy board meeting previously scheduled for Monday and Tuesday would now be cut short and conclude on Monday, seen as a sign it may quickly implement further measures.

The government said Sunday it expects a "considerable" economic impact from the huge earthquake and devastating tsunami that plunged the nation into what Prime Minister Naoto Kan called its worst crisis since the Second World War.

Economists say it is still too early to assess the cost of the destruction from the record 8.9-magnitude quake and the 10-metre wall of water that laid waste to swathes of the northeastern coast and triggered an atomic emergency.

The official death is certain to rise substantially, with one hard-hit prefecture saying as many as 10,000 could be dead.

The quake and tsunami have damaged or closed down key ports, although airports such as Tokyo's Narita have reopened. Transport infrastructure such as train lines and roads have been crippled along parts of the northeast.

Many top Japanese firms have said they are suspending operations. Automakers Toyota, Nissan and Honda have announced the total suspension of production in Japan for the time being.

Their shares plunged more than 10 per cent at the open on Monday but later recovered some ground.

The world's biggest automaker Toyota was down 7.23 per cent at 3,335 yen, Nissan was off 8.52 per cent at 730 and Honda lost 3.77 per cent.

"In the auto sector, speculation is mounting that carmakers would be forced to further suspend operations due to the disaster," said Yamamoto.

"It will take more time to assess an actual impact of the disaster on the sector."

Shares in plant operator Tokyo Electric Power (TEPCO) and Tohoku Electric Power remained ask-only on concerns about nuclear power plant shutdowns amid massive selling demand.

With its two Fukushima nuclear plants damaged by Friday's quake, the company is planning an unprecedented rationing of power later in the day to make up for an expected power shortage.

An explosion shook a quake-damaged Japanese nuclear power plant Monday but the reactor was apparently not breached, the chief government spokesman Yukio Edano said.

Toshiba, which manufactures nuclear reactors, fell by its 16 per cent daily limit to 411.

Sony was off 9.01 per cent at 2,553.



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