Nikkei in Tokyo Plunges 6.2%; Bank of Japan Adds Liquidity

Nigel Thomas
14 Mar, 2011
New York City

The benchmark index in Tokyo plunged more than 6% and the central bank pumped short term liquidity to stem the rise in the yen. Automakers suspended production and insurance companies led the decliners and construction companies led the gainers as Tokyo Stock Exchange imposes daily trading limit.

[R]5:00 PM Tokyo – The benchmark index in Tokyo plunged more than 6% and the central bank pumped short term liquidity to stem the rise in the yen. Automakers suspended production and insurance companies led the decliners and construction companies led the gainers as Tokyo Stock Exchange imposes daily trading limit.[/R]

Stocks and Market index in Tokyo plunged more than 5% at the opening and government injected a record 15 trillion yen or $183 billion into the short-term money market and offered to buy as much as 3 trillion yen in government bonds from March 16.

Auto makers and several electronics maker suspended production.

Most heavily traded stocks on a normal trading day could not open as sell orders overwhelmed buy orders.

The trading in Tokyo was emotionally charged and investors in Asia were focused on the developments in Japan. Japanese central bank pumped the money so that banks can extend emergency lending to earthquake stricken borrowers but the mood at trading desks in Tokyo was somber.

The Tokyo exchange placed a daily limit of 500 yen movement for all stock priced between 2,000 yen and 2,999 yen.

The benchmark index Nikkei 2205 Stock Average declined 6.1% or 633.94 to 9,620.49 and nuclear power plant operator Tokyo Electric Power Company dropped 24%.

The broader Topix index declined 7.5% to 846.96. The one-day decline the Nikkei benchmark index was the largest since December 2008.

The Japanese yen declined to 82.96 against a dollar but rose sharply at the opening to 80.62 and eased after the central bank announcement.

Investors sold stocks in Japan on the worries of huge rebuilding costs and the government debt is more than 100% of Japan’s gross domestic product or more than 200% of its national income.

Stock Movers

In the early trading, Toyota and Nissan plunged as much as 10% and Honda declined 8%.

Toyota Motor closed down 7.9% to 3,310 yen and Nissan declined 9.5% to 722 yen and Honda Motor fell 6.5% to 3095 yen. Mitsubishi Motors Corp declined 11.8% and Isuzu Motors Ltd dropped 9.2%.

Tokyo Electric Power plunged 23.57% or its daily limit to 1621 yen. The company officials said in a press conference that fuel rods are exposed and partial cooling may not be effective to avert the meltdown of fuel rods.

Nuclear power plants linked companies plunged in Tokyo trading. Toshiba Corp plunged daily limit of 80 yen or 16% and Tokio Marine Holdings Inc dropped 12%. Dai-Ichi Life Insurance Co dropped 18%.

Construction companies extended Friday gains. Obayashi Corp increased 11% and Shimizu Corp increased 11% and Kajima Corp galloped 22%.