The Nikkei 225 index was down 6.2 percent not long after the midday break in Tokyo, accelerating the morning’s slide after an explosion rocked one of the earthquake-stricken nuclear plants in the north-east of the country.
The broader Topix, or Tokyo Stock Price index, was down 6.8 percent.
Industrial, manufacturing and financial stocks were particularly hurt, amid huge uncertainty over the extent of the damage and continuing aftershocks as well as the systematic rolling blackouts that began Monday and their effect on production.
With many car factories closed on Monday, Mitsubishi Motors plummeted 9.1 percent, Nissan was down 8.5 percent and Toyota fell 7.3 percent.
Sony slumped 7.7 percent, Canon dropped 5.8 percent and Panasonic was down 6.9 percent. Toshiba plummeted 16.3 percent and Hitachi by 15.2 percent.
The country’s main banks also slumped badly, with Mizuho Financial Group down 9.6 percent. Mitsubishi UFJ Group slumped 6.7 and SMFG 5.9 percent.
Construction companies, by contrast, soared on expectations of the massive reconstruction that will be needed in the quake-stricken areas. Hazama Corp. and Kumagai Gumi, for example, jumped more than 40 percent, while many others in the sectors saw gains of well over 10 percent.
The country’s central bank, meanwhile, offered to pump a record 15 trillion yen, or $183.8 billion, of extra liquidity into the banking system in a bid to help stabilize markets, Reuters reported.
The Bank of Japan holds its monetary policy meeting later Monday. With interest rates in Japan already near zero, it cannot lower rates further to help support the economy, though it could announce additional asset purchase steps, credit programs and lending facilities, economists said.
The policy meeting, which normally is held over two days, has been shortened to one day because of the quake.
“Humanitarian issues aside, preliminary estimates of the economic impact of the disaster remain perhaps surprisingly low, on the order of tens of billions of U.S. dollars rather than hundreds of billions. By comparison, recall the U.S. Congress set aside $750 billion of TARP funds to prevent financial sector turmoil there in early 2009,” economists at DBS in Singapore said in a note on Monday. “Much of the damage will plainly come in the form of lost property and infrastructure, with insurance companies and re-insurance companies shouldering most of the burden. Government borrowing is sure to rise.”
The costs of rebuilding and cleanup will put additional pressure on government finances in a country that is already highly indebted, further tying the hands of policy makers who have been struggling to revive an economy bogged down by deflation. The quake struck just as the economy was starting to register growth again, and has raised fears that the tentative recovery will at least be delayed.
The Japanese yen, meanwhile, was volatile on Monday, first strengthening against the dollar and then weakening after the Bank of Japan injected liquidity into the money markets. The yen last traded at 82.06 yen, compared to 81.84 in New York late Friday.
Despite its slump Monday, the Japanese currency remained stronger than it had been before the quake struck on Friday, as Japanese repatriated overseas investments to help pay for rebuilding.
And analysts said the yen could well rise even more, adding to the pain felt by Japanese exporters, as a strong yen makes Japanese goods more expensive overseas, which could hurt the export-dependent economy as a whole.
“The strong yen bias could be enhanced by the negative effect on the Japanese economy, reduced tolerance for risk and the repatriation of funds in the wake of the earthquake,” strategists at Nomura said in a note Monday.
Elsewhere in the region, the reaction was relatively muted. The Kospi in South Korea fell 0.7 percent, the Taiex in Taiwan dropped 1.1 percent, and the key index in Australia was down 0.9 percent. In Hong Kong, the Hang Seng index sagged 0.4 percent, while the Straits Times index in Singapore slipped 0.5 percent.
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