Bank of Japan to support markets as state fears economic impact of quake

The Bank of Japan is ready to step in and stabilise the country's financial markets with an injection of up to Y3 trillion (£22.8bn) into the banking system today, as a senior government official admitted the economic impact of the disaster could be "considerable".

Central bank governor Masaaki Shirakawa said after a cabinet meeting yesterday: "We will monitor market conditions and plan to provide markets with a lot of liquidity first thing tomorrow morning." Over the weekend it extended Y55bn to banks in areas hit by the earthquake.

The government has been working hard to minimise the economic fallout, although a mass sell-off is expected in markets around the world today starting at the Tokyo exchange after officials said trading would go ahead. In early trading, shares plunged, with the benchmark Nikkei 225 stock average shedding 556 points, or 5.4 per cent, to 9,698.37.

Yukio Edano, Japan's chief cabinet secretary, said yesterday: "The quake is expected to have considerable impact on a wide range of our country's economic activities."

In the wake of the disaster, several of Japan's largest companies suspended operations and others are expected to follow this week. Carmakers Honda, Nissan and Toyota suspended operations shortly after the earthquake hit, as they feared for employee safety, and Mitsubishi announced yesterday it too had halted production at its three domestic plants. Sony, Suzuki and Fuji Heavy Industries have also taken similar precautions.

Yoshikatsu Nakayama, parliamentary secretary of the Economy, Trade and Industry Ministry, met with members of the Japan Business Federation, in a bid to persuade them to shift production outside of the Tohoku and Kanto regions hit by the earthquake.

The Bank of Japan said over the weekend that it would do its "utmost" to ensure the stability of its domestic markets and has cut a two-day meeting starting today to one day. Analysts predicted that the central bank could step in with a fresh round of quantitative easing, especially if the yen surges. Yet, economists predicted the earthquake would push Japan into a technical recession after its economy had shrunk in the three months to the end of the year, especially if the factories remain closed for any prolonged period.

"The timing of the disaster could not have been much worse," consultancy and research group Capital Economics said, adding the economic costs and impact on the public finances "could be considerable".

The decision to open the Tokyo Stock was announced yesterday after officials held talks with financial regulators and government officials. Financial Services Minister Shozaburo Jimi said the authorities would watch closely to ensure against market manipulation. The Nikkei gave up 1.7 per cent to 10,254 points on Friday, but the full impact of the earthquake was not felt in the financial markets as it hit late in the day. Following the Kobe earthquake in 1995, the Nikkei fell 8 per cent over the following five days, although it then rebounded strongly.

On Friday, futures in the index in Chicago fell to 10,005 but experts feared investor sentiment had worsened since then, adding the index could plunge today. Masaru Hamasaki, senior strategist at Toyota Asset Management told Reuters: "Initially all sectors will be under selling pressure. The Nikkei can drop about 20 percent from a recent high of around 10,900. It could fall below 9,000 in the near term."

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot