Japan pumps in more capital
By Tomoko A. Hosaka |
March 16, 2011, Wednesday
|
Print Edition
Print Edition
JAPAN'S central bank pumped billions more into the financial system yesterday to quell fears that the country's banks could be overwhelmed by the impact of the massive earthquake and tsunami. Stocks slumped for a second day as a nuclear crisis escalated.
Two cash injections totaling 8 trillion yen (US$98 billion) came a day after the Bank of Japan fed a record 15 trillion yen into money markets and eased monetary policy to support the economy in the aftermath of Friday's 9.0-magnitude quake that has killed thousands.
The injections have helped stabilize currency markets. But stock markets dived for a second day as investors unloaded assets amid escalating worries of a nuclear crisis.
The benchmark Nikkei 225 stock average slid as much as 14 percent after Prime Minister Naoto Kan warned residents near a damaged nuclear power plant in tsunami-ravaged northeastern Japan to stay inside or risk getting radiation sickness. It closed yesterday down 10.6 percent at 8,605.15.
Radiation is leaking from damaged reactors at the crippled plant in a dramatic escalation of the four-day-old catastrophe. Kan said there are dangers of more leaks and told people living within 30 kilometers of the Fukushima Dai-ichi complex to stay indoors.
The Bank of Japan has moved quickly to try to calm financial markets. 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.
Analysts say Japan can tap its vast bond market to help pay for reconstruction in the coastal regions shattered by the tsunami that the quake spawned. But it will add to strains on the national finances. The country is saddled with massive debt that, at 200 percent of gross domestic product, is the biggest among developed nations.
"Japan will be poorer, for this disaster," said Peter Morici, a business professor at the University of Maryland. "Rebuilding will run down Japan's financial wealth."
Credit Suisse economist Hiromichi Shirakawa and analysts at Barclays Capital estimated the damage at up to 15 trillion yen - about 3 percent of gross domestic product. Other experts warned the economy will shrink for two straight quarters.
Two cash injections totaling 8 trillion yen (US$98 billion) came a day after the Bank of Japan fed a record 15 trillion yen into money markets and eased monetary policy to support the economy in the aftermath of Friday's 9.0-magnitude quake that has killed thousands.
The injections have helped stabilize currency markets. But stock markets dived for a second day as investors unloaded assets amid escalating worries of a nuclear crisis.
The benchmark Nikkei 225 stock average slid as much as 14 percent after Prime Minister Naoto Kan warned residents near a damaged nuclear power plant in tsunami-ravaged northeastern Japan to stay inside or risk getting radiation sickness. It closed yesterday down 10.6 percent at 8,605.15.
Radiation is leaking from damaged reactors at the crippled plant in a dramatic escalation of the four-day-old catastrophe. Kan said there are dangers of more leaks and told people living within 30 kilometers of the Fukushima Dai-ichi complex to stay indoors.
The Bank of Japan has moved quickly to try to calm financial markets. 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.
Analysts say Japan can tap its vast bond market to help pay for reconstruction in the coastal regions shattered by the tsunami that the quake spawned. But it will add to strains on the national finances. The country is saddled with massive debt that, at 200 percent of gross domestic product, is the biggest among developed nations.
"Japan will be poorer, for this disaster," said Peter Morici, a business professor at the University of Maryland. "Rebuilding will run down Japan's financial wealth."
Credit Suisse economist Hiromichi Shirakawa and analysts at Barclays Capital estimated the damage at up to 15 trillion yen - about 3 percent of gross domestic product. Other experts warned the economy will shrink for two straight quarters.
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