Tokyo stocks hammered, BoJ unleashes record funds
Tokyo (AFP) March 15, 2011
Japanese stocks tumbled Monday and the central bank pumped 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.
Nuclear plant operator TEPCO dived almost 24 percent on fears of a meltdown at one of its reactors while producers such as Sony and Toyota tumbled as power shortages prompted blackouts and factories remained closed, hurting production.
The Bank of Japan said it would pump in 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.
An additional 6.8 trillion yen will be deployed Tuesday and Wednesday, including 3 trillion in bond purchases, bringing the total available to 21.8 trillion yen.
The BoJ will also double a five trillion yen asset purchase scheme to help buffer the economy from the shock of Japan's strongest ever quake, and left its key rate at between zero and 0.1 percent.
But the move provided little relief for unnerved traders, with another explosion at Tokyo Electric Power's (TEPCO) Fukushima Number One nuclear plant helping push the index lower as economists eyed the impact on Japan's growth.
"Shares will be dragged down with Japan's March GDP figures expected to be sharply lower on a slump in economic activity, delays in distribution of goods on power cuts and loss of human lives," Shoji Hirakawa of UBS said.
Tokyo stocks saw their biggest fall for two years, plunging 6.18 percent Monday with the key Nikkei index tumbling below 10,000 to 9,620.49 as top Japanese firms suspended operations.
Automakers Toyota, Nissan and Honda have announced the suspension of production in Japan. At one point Toyota -- which said it would shut production until at least Wednesday -- and Nissan slumped more than 10 percent.
TEPCO slumped 23.57 percent to 1,621 yen, following an explosion Monday in the building around the number three reactor at the troubled Fukushima plant.
Later Monday, authorities put into action plans for rolling power cuts in areas served by TEPCO to make up for the loss of power from crippled nuclear plants.
In further bad news for the company, US ratings agency Moody's said it was to review its assessment of TEPCO, citing the substantial costs the company would face for capital expenditure and sourcing replacement power, especially at a time of high oil prices.
Toshiba, which manufactures nuclear reactors, fell by its 16 percent daily limit to 411 yen. Sony, which has also shuttered plants, dived 9.12 percent to 2,550.
The yen briefly touched a four-month high before easing against the dollar on the massive liquidity injection. It surged to 80.60 against the greenback, the highest since November 9, and hovered around 82 after the fresh explosion at Fukushima as engineers battled to avoid a meltdown.
The government 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 World War II.
The priority of the central bank is to ensure that financial institutions in disaster-hit regions do not run out of funds. Over the weekend it provided them with 55 billion yen to ease the pressure before Monday's fresh fund move.
Monday's injection was the BoJ's first since European sovereign-debt fears pushed up the yen steeply in November and weighed on Tokyo shares, when it injected same-day funds to boost confidence.
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 toll is expected to rise substantially to more than 10,000.
The quake and tsunami have damaged or closed down 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.
A mammoth rebuilding task will be required in the aftermath of a disaster whose economic impact is widely expected to be at least as bad as that from the 1995 Kobe earthquake which killed 6,400 people.
Japanese Finance Minister Yoshihiko Noda said Monday that an extra budget to fund reconstruction efforts will likely top the amount spent following the Kobe quake.
Friday's 8.9-magnitude quake was 300 times stronger than the one in Kobe in 1995, which cost 9.9 trillion yen, or 2.0 percent of GDP, in direct damage, noted Masaaki Kanno of JPMorgan Securities.
Kanno and other economists see Japan's growth being hit in the first half, but benefiting in the second half as reconstruction efforts kick in.
But Japan faces a huge challenge in financing it without expanding a public debt that is already the industrialised world's biggest at around 200 percent of GDP. The nation's credit rating was recently downgraded on concerns that not enough is being done to address it.
The United States said Monday it believed Japan would be able to ride out the economic aftershocks of its earthquake and tsunami disaster.
"We have full confidence in the capacity of Japan to address the economic challenges during these exceptionally difficult times," said White House spokesman Jay Carney.
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Paris (UPI) Mar 14, 2011
In normal times, any one of three or even four news items in the last week would have stunned the markets, so these days we are either all punch-drunk or nobody knows what's going on. But it took the tragedy of the Japanese earthquake and tsunami to send stock markets reeling. Bill Gross is one of the few who thinks he does know what's happening. He runs the $1.2 trillion PIMCO investme ... read more
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