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Japan's Nikkei down 5% in the first session after quake Japan's Nikkei falls 4.5% in first session after quake
(about 1 hour later)
Japanese shares plummeted at the open on Monday morning, the first trading day after the massive earthquake that hit Japan's northeast shore. Japanese shares have tumbled on the first trading day after the massive earthquake and tsunami that hit the country's northeast shore.
The benchmark Nikkei 225 Index fell 5% as trading resumed. The benchmark Nikkei 225 Index fell 4.5%, while the broader Topix index was trading 6% lower.
The quake hit Japan just before the markets closed on Friday. At one point the Nikkei dropped by almost 6%, knocking more than $150bn off its total market value.
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. The Bank of Japan will inject 7 trillion yen ($85bn; £52.9bn) into the banking system to stabilise markets.
Immediately after Friday's earthquake, the central bank pledgedto "do its utmost," including providing liquidity. Immediately after the quake, the central bank pledged to "do its utmost" to limit its impact, including providing liquidity to money and banking markets.
The fall in the share markets had been widely predicted, especially of companies directly impacted by the earthquake and tsunami. The deadly quake and subsequent tsunami hit Japan just before the markets closed on Friday.
"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. "The recent major earthquake is bound to exert downward pressure on Japanese equities as a whole over the near term," Nomura said in a note to investors.
Analysts have been encouraged by the resilience of the stock markets in Australia and New Zealand after the recent natural disasters there. Elsewhere in the region, the main markets have also fallen on Monday, though the declines were smaller than those seen in Japan.
"In the medium term, the impact on markets is not likely to be that great," said Arjuna Mahendaran of HSBC private bank. South Korea's Kospi share index slid 0.9%. Singapore's STI index shed more than 0.4% and Taiwan's main index dropped 0.8%.
Regional reaction Production troubles
Elsewhere in the region, the main markets have also fallen, though the declines were smaller than those seen in Japan. Japanese carmakers and electronics firms led the declines on Monday.
South Korea's Kospi share index slid 0.1%. Early trading was complicated because many sellers of shares struggled to find buyers. As a result, a number of stocks remained untraded once the markets had opened.
However in some sectors, notably technology and carmakers, shares have been gaining. Shares of Toyota Motors, the world's biggest automaker, fell 8.9% after it suspend operations at all of its 12 Japanese factories.
Investors are betting on increased orders for Korean goods as production is suspended in many of Japan's factories. Japanese factories account for 38% of Toyota's overall production.
Singapore's STI index shed more than 1% and Taiwan's main index dropped 0.8%. Honda, Japan's third-largest automaker, fell 9.1%. The company makes about a quarter of all its cars in Japan.
Electronics companies including Hitachi and Toshiba also dropped, shedding more than 15%.
Japanese Economics Minister Kaoru Yosano was quoted by the Jiji news agency saying that he was keeping a close eye on the movement of Japan's currency, the yen, which has strengthened.
Economists said that a stronger yen may make it harder for companies to sell their goods abroad, further hurting their earnings.
'Weakened Japan'
Analysts said that there were concerns about the speed with which Japan's economy could rebound from the problems.
Last month Japan was overtaken by China as the world's second-largest economy.
"In the short term, the market will almost surely suffer and stocks will plunge," said Koetsu Aizawa, economics professor at Saitama University.
"People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake."
Some analysts have forecast that Japan's economy may lose as much as a percentage point in growth this year because of the quake.
Japan's economy contracted by a more-than-expected 1.3% in the final three months of 2010.
Rebuilding effort
However, while there are concerns about the short-term impact on the economy, there are industries where investors are looking to increase their holdings.
Shares in Japanese construction firms have surged in value on Monday as they are expected to play a central role in rebuilding the country in coming months.
Foreign firms have also been in focus, notably technology producers and carmakers, where shares have been gaining.
Investors, for example, are expecting an increase in orders for Korean goods because production has been suspended in many of Japan's factories.