Japan's Nikkei down 5% in the first session after quake
(about 9 hours later)
Investors will be watching the Nikkei stock market in Japan when it re-opens on Monday, after it closed down 1.7% after Friday's earthquake and tsunami.
Japanese shares plummeted at the open on Monday morning, the first trading day after the massive earthquake that hit Japan's northeast shore.
The Bank of Japan will also meet to discuss how to ensure market stability.
The benchmark Nikkei 225 Index fell 5% as trading resumed.
Traders will be worried the Nikkei may fall on fears that growth in the world's third-largest economy may slow.
The quake hit Japan just before the markets closed on Friday.
The quake hit just before the exchange closed, so the impact of the disaster was not fully factored in, although Nikkei stock futures did then fall 5%.
Bank of Japan governor Masaaki Shirakawa announced that the central bank will inject 7 trillion yen ($85bn; £52.9bn) into the banking system to keep the markets stable.
There will also be a focus on how other Asian markets react after the devastating events in the north-east of Japan.
Immediately after Friday's earthquake, the central bank pledgedto "do its utmost," including providing liquidity.
Bank of Japan governor Masaaki Shirakawa said the central bank would provide huge amounts of liquidity to the banking system on Monday, in a drive to keep markets stable.
The fall in the share markets had been widely predicted, especially of companies directly impacted by the earthquake and tsunami.
"We will monitor market conditions and plan to provide markets with a lot of liquidity first thing tomorrow morning," he told reporters after attending a meeting of cabinet ministers for discussion on the economy on Sunday.
The Financial Services Agency also confirmed that Tokyo financial markets would operate as normal on Monday.
Budget calls
"Stocks will probably fall on Monday, especially of those companies that have factories in the affected areas, but on the whole the sell-off will likely be short-lived," said Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management.
"Stocks will probably fall on Monday, especially of those companies that have factories in the affected areas, but on the whole the sell-off will likely be short-lived," said Mitsuhsige Akino, a fund manager at Ichiyoshi Investment Management.
Analysts cite the example of the stability of the stock markets in Australia and New Zealand after the recent natural disasters there.
Analysts have been encouraged by the resilience of the stock markets in Australia and New Zealand after the recent natural disasters there.
"In the medium term, the impact on markets is not likely to be that great," said Arjuna Mahendaran of HSBC Private Bank.
"In the medium term, the impact on markets is not likely to be that great," said Arjuna Mahendaran of HSBC private bank.
The Bank of Japan will hold a one-day policy meeting on Monday, with one of its priorities being to ensure commercial banks in earthquake-struck regions do not run out of cash in case depositors rush to withdraw money.
Regional reaction
The ruling and opposition parties are also reported to have agreed for further emergency financial measures.
Elsewhere in the region, the main markets have also fallen, though the declines were smaller than those seen in Japan.
"We still don't know the full scale of the damage, but considering what happened after the earthquake in Kobe [in 1995], this will certainly lead the government to compile an emergency budget," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
South Korea's Kospi share index slid 0.1%.
There are concerns over the cost of rebuilding, and the impact it will have on Japan's public finances.
However in some sectors, notably technology and carmakers, shares have been gaining.
Tax issue?
Investors are betting on increased orders for Korean goods as production is suspended in many of Japan's factories.
Analysts say the reconstruction expense will have a heavy impact on the government's debt and budget deficit.
Singapore's STI index shed more than 1% and Taiwan's main index dropped 0.8%.
Japan already has the highest level of national debt in the industrialised world.
"As the deficit grows, the government may be forced into raising taxes to make up for that," said Mr Mahenderan.
"A raise in taxes could push the economy into recession," he added.
However, despite these concerns, many analysts predict that the rebuilding effort may well help boost economic growth.
"The earthquake will most likely lead to stronger growth in 2011, rather than weaker," said Takuji Okubo of Societe Generale.
