Tokyo shares staged a rebound yesterday on bargain hunting after the biggest two-day sell-off on the Nikkei index for 24 years amid the world’s worst nuclear crisis since Chernobyl.
But questions hang over the Nikkei’s ability to reclaim the 16 per cent losses it made on Monday and Tuesday with investors focused on the emergency at a stricken nuclear plant.
Yesterday, the Nikkei closed up 5.68 per cent, adding 488.57 points to 9,093.72.
For the third straight day the Bank of Japan pumped emergency funds into the financial system. It offered 5.0 trillion yen ($61.8 billion) for money markets as part of a total pledge of 13.8 trillion across other market functions.
The central bank put up eight trillion in same day funds Tuesday and a record 15 trillion on Monday to soothe sentiment and ensure firms can access cash. It has doubled to 10 trillion yen an earlier asset purchase scheme.
“There appears to be some buying back by hedge funds following yesterday’s panic-selling,” Cosmo Securities equity strategist Toshikazu Horiuchi told Dow Jones Newswires.
“But unless the nuclear power plant issues are resolved, the reconstruction efforts will not be able to start and only then can we gauge the impact (of the earthquake) on earnings,” he added.
The yen firmed to 80.83 from 80.78 in New York late Tuesday.
The Fukushima plant northeast of Tokyo has suffered a series of blasts and fires since Saturday after it was rocked by the record 9.0 magnitude quake on Friday, triggering a 10-metre tsunami thought to have killed more than 10,000 people.
Yesterday crews racing to prevent a meltdown suspended work due to radiation fears, with authorities pointing to possible damage to the number three reactor and the release of radioactive steam.
Despite the gains across the Nikkei shares in Tokyo Electric Power, or TEPCO, the operator of the stricken Fukushima nuclear power plant, dived by nearly 25 per cent for the third consecutive day as a deluge of sell orders intensified.
Japan relies on its nuclear plants to provide around 30 per cent of its energy needs, but post-quake shutdowns have led to power shortages prompting energy saving measures that have dimmed the usually neon-lit Tokyo.
With rolling power cuts planned for Japan, companies from big producers to suppliers of key components were forced to shut plants. World markets tumbled Tuesday on fears for the global supply chain.
“Japan’s transportation infrastructure has been crippled, electric power to factories is facing constant disruption and nuclear power capacity has been severely limited after last Friday’s devastating earthquake and subsequent tsunami,” said Moody’s Analytics.
“Given Japan plays a pivotal role in the global production supply chain, factory shutdowns are harming global output,” it said. However, exporters recovered ground yesterday as bargain hunters swept in.
In a rare piece of positive news for the economy, Toyota said it would resume partial production of car parts at seven plants in Japan today, after suspending all factories following the nation’s biggest ever earthquake.