Japanese shares fall 5% after disaster
Japanese shares have plunged on the first business day since the country was hit by a devastating earthquake and tsunami.
The Nikkei index shed 4.8% shortly after the stock market opened on Monday morning.
Worries about the economic impact of the disaster, including power shortages, triggered a broad sell-off that has hit all sectors.
The quake struck just before the country’s stock market closed on Friday, so the full impact was not fully factored in. Nevertheless the Nikkei fell by almost 2%.
The Bank of Japan has injected 15 trillion yen ($183 billion) into the money market to stabilise fears after the disaster.
The bank hopes the influx of cash will mean other banks will continue lending money and meet the likely surge in demand for post-earthquake funds.
Early estimates put the cost of the clean-up and repair effort at tens of billions of dollars.
The three biggest motor manufacturers – Nissan, Honda and Toyota – are halting production at almost all of their domestic plants.
Even in unaffected areas, deaths and the safety of their workers have made factory shutdowns inevitable, with Sony and Panasonic amongst them.
The country has the world’s third largest economy and whatever happens in Japan has a global effect.
Japanese economics expert Dr Mark Manger said: “The immediate effect we will see is there will probably be a rise in the price of natural gas, simply because the Japanese will have to substitute natural gas for the nuclear fuel that they can’t use at the moment.
“We might see a drop in the price of petrol, because Japanese industry is going to use less oil for the time being.”
It is far too early to calculate the financial cost to Japan.
The Kobe earthquake in 1995 which killed more than 6,000 people, cost the country £62bn. That represented about 2% of the economy at the time.
But replacing the infrastructure and buildings meant that GDP actually rose by 3% in the short term.
“I am very cautious of these arguments that seem to suggest that the bigger the disaster, the better news for the economy, which is completely wrong,” said Stephen King, HSBC Group Chief Economist.
“What is happening is that resources which could have been devoted to other things are now having to be used for the process of rebuilding,” he added.
Lloyds of London has offered a worst case estimate of close on £32bn for the global insurance bill.
Source: Sky News