Tokyo shares dive as nuclear crisis escalates

TOKYO - Japanese shares dived Tuesday, with TEPCO losing 24 percent, after Prime Minister Naoto Kan warned levels of radiation leaked from one of its nuclear plants hit levels that posed a threat to health.


Authorities evacuated non-essential staff from the Fukushima Number One plant while Kan told people up to 10 kilometres (six miles) from the exclusion zone to stay indoors.

Shares dived more than 14 percent but rebounded slightly. Corporate giants such as Toyota and Sony were again hit by selling as they have been forced to halt production across Japan while nuclear plant operator TEPCO slumped 24.67 percent, adding to Monday's 23.57 percent loss.

As international concern over Japan's nuclear emergency mounts, Kan said the risk of further releases of radioactive material from the nuclear plant remained "very high."

Panicking investors sent the Nikkei index tumbling on news of the escalating nuclear emergency, falling more than 14 percent before clawing back ground with shares ending down 10.55 percent, or 1,015.34 points, at 8,605.15.

It was the biggest one-day fall since the Lehman crisis in 2008 at the beginning of the global financial crisis.

"It's panic-selling. It's not only foreign investors -- everybody just wants to dump shares," Retela Crea Securities general manager Yosuke Shimizu said of the 14 percent nosedive, Dow Jones Newswires reported.

In volatile trade the yen dived against the dollar before quickly snapping back as traders worried about the escalating on clear emergency.

The dollar rose to 82.01 before quickly falling back to 81.47. It was trading at 81.63 by 0715 GMT.

The Bank of Japan pumped eight trillion yen ($97.8 billion) into the financial system to soothe shaken money markets following a record 15-trillion yen injection Monday.

Japan's biggest ever earthquake and a devastating tsunami that followed are expected to have claimed at least 10,000 lives.

Ratings agency Standard & Poor's placed TEPCO on credit watch as engineers raced to avoid a meltdown in four reactors at the crippled plant.

"There is no sense of calmness to examine the health of the Japanese economy as a whole," said Masayoshi Yano, senior market analyst at Meiwa Securities.

Reactor-maker Toshiba, which fell by its 16 percent daily limit Monday, was ask-only.

Economists say it is still too early to assess the cost of the destruction from the record 9.0-magnitude quake and the 10-metre wall of water that laid waste to swathes of the northeastern coast and triggered an atomic emergency.

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.

Among the nation's top companies Toyota was off 4.83 percent at 3,150 yen while Nissan fell 3.6 percent to 696 and Honda was down 3.81 percent at 2,977.

Sony dived 6.27 percent to 2,390.

The move by the BoJ to pump eight trillion yen came after it said Monday it would inject a record 15 trillion yen to help stabilise the short term-money market, making good on an earlier pledge that it would unleash "massive" funds following the disasters.

The BoJ also said it will double a five trillion yen asset purchase scheme to help buffer the economy from the shock of the catastrophes.

The central bank's priority 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 move.

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.

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.

"History tells us that such natural disasters rarely leave lasting damage to the Japanese economy though the short-term effect can be quite a different story," noted Merrill Lynch chief investment office Bill O'Neill.

"Early estimates from this event suggest damages could be as high as $35 billion."

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 a rebuild 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.

- AFP/ir