Japan sprays more cash over jittery markets

[March 17, 2011]  TOKYO (AP) -- Japan's central bank sprayed more cash over jittery money markets Thursday as a major bank's ATMs suffered a two and a half hour outage nationwide and the yen shot to a record high.

The Bank of Japan injected an additional 6 trillion yen ($76.7 billion) in same-day funds after the dollar hit 76.25 yen in the morning -- an all-time low for the greenback in the aftermath of Friday's earthquake and tsunami that killed thousands and triggered an unfolding nuclear crisis. With same-day funds, banks in need can access cash immediately.

Mizuho Bank, Japan's third biggest lender, said 5,600 automatic cash dispensing machines were back online by midday after blacking out at about 9 a.m. It didn't explain the outage, which had added to already rattled nerves.

The capital Tokyo endured more rolling blackouts Thursday and faces months of power shortages because of earthquake damage to nuclear and conventional power plants.

The utility that serves Tokyo has been forced to slash power supplies by a quarter. Power to parts of the sprawling region, which produces 40 percent of Japan's economic output, is cut for three hours a day.

Around the country, people queued for fuel and emptied supermarket shelves of food and other necessities. Hundreds of thousands of people in the devastated northeast continued to shelter in temporary accommodation.

Driving the yen to unprecedented highs were predictions that big Japanese investors like insurance companies would repatriate funds from overseas en masse to cover the cost of tsunami damage to northeastern Japan, said Masafumi Yamamoto, chief foreign exchange strategist at Barclays Capital in Tokyo.

The repatriation hasn't happened yet, so the volatility is "highly speculative," he said. The market is now betting that the finance ministry and Bank of Japan will intervene to sell the dollar and weaken the yen. A strong yen hurts Japan's exporters, potentially deepening the already severe hit to the world's No. 3 economy from the multiple disasters.

Analysts at Goldman Sachs estimated that Japan's disaster losses could reach $200 billion, which is more than 3 percent of Japan's gross domestic product.

The hardest hit prefectures (states) -- Iwate, Miyagi, Fukushima and Ibaraki -- represent about 7 percent of Japan's economy.

The region is home to steel plants, oil refineries, nuclear power plants and factories making parts for cars and electronics. Roads and other transport networks are crippled, while power supplies are constrained.

The latest offer of central bank funding didn't prevent stocks from losing ground again. The Nikkei 225 stock average closed down 1.4 percent at 8,962.67 after plunging on Monday and Tuesday before partly recovering on Wednesday.

The Bank of Japan conducted emergency operations for the fourth day in a row, adding to the 55.6 trillion ($688 billion) it provided money markets the previous three days. Of that figure, 28 trillion yen were same-day funds.

By flooding the banking system with money, it hopes banks will continue lending and meet the expected surge in the demand for post-disaster funds.

Financial markets nervously monitored the rapidly changing situation at a crippled nuclear power plant in the northeast. On Thursday, Japanese military helicopters dumped loads of seawater onto the plant, trying to cool dangerously overheated uranium fuel rods that may be on the verge of spewing more radiation into the atmosphere.

The nuclear crisis has triggered international alarm and partly overshadowed the human tragedy caused by Friday's quake.

Australia, Britain and Germany advised their citizens in Japan to consider leaving Tokyo and earthquake-affected areas, joining a growing number of governments and businesses telling their people it may be safer elsewhere.

In China, worried shoppers stripped stores of salt in Beijing, Shanghai, and other parts of the country in the false belief it can guard against radiation exposure even though any fallout from a crippled Japanese nuclear power plant is unlikely to reach China.

The Kuala Lumpur-based Association of Asia Pacific Airlines said outbound travel from Japan is heavy at the moment, while inbound traffic for business and leisure has been severely crimped.

It said most airlines were now focusing on clearing a backlog of disrupted passengers, with Japanese carriers mounting additional relief flights bringing supplies to hardest-hit areas.

"Anxiety about possible escalation of the nuclear crisis and simply a fear of the unknown is driving behavior right now," said its director-general Andrew Herdman.

[Associated Press; By TOMOKO A. HOSAKA]

Associated Press writer Eileen Ng in Kuala Lumpur, Malaysia and business writer Joe McDonald contributed.

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