Japan Central Bank Injects Cash in Attempt to Keep Financial Markets Stable
Tokyo (AP) - Japan's central bank injected a record 15 trillion yen ($184 billion) into money markets and eased monetary policy, while the Tokyo stock market nosedived Monday after a devastating earthquake and tsunami raised dire worries about the economy.
The benchmark Nikkei 225 stock average slid 633.94 points, or 6.2 percent, to 9,620.49, extending losses from Friday. The earthquake hit shortly before markets closed for the weekend. Escalating concerns about the financial fallout of the disaster triggered a plunge that hit all sectors. The broader Topix index lost 7.5 percent.
The Bank of Japan moved quickly to try to keep financial markets stable. By flooding the banking system with cash, it hopes banks will continue lending money and meet the likely surge in demand for post-earthquake funds.
Later in the day, its nine-member policy board gathered for a shortened meeting and voted unanimously to ease monetary policy. It will expand the size of an existing program to buy assets -- such as government and corporate bonds -- by 5 trillion yen to 40 trillion yen ($486.4 billion).
It also decided to keep its key interest rate at virtually zero.
"The damage of the earthquake has been geographically widespread, and thus, for the time being production is likely to decline," the central bank said in its statement. "There is also concern that that sentiment of firms and households might deteriorate."
Preliminary estimates put repair costs from the earthquake and tsunami in the tens of billions of dollars -- a huge blow for an economy that lost its place as the world's No. 2 to China last year, and was already in a fragile state.
Japan's economy has been ailing for 20 years, barely managing to eke out weak growth between slowdowns, saddled by a massive public debt that, at 200 percent of gross domestic product, is the biggest among industrialized nations.
Among the hardest hit on the stock exchange, shares of The Tokyo Electric Power Co. plunged more than 23 percent as it faced power shortages and a second hydrogen explosion at a nuclear reactor Monday, sending a massive column of smoke into the air and wounding six workers.
East Japan Railway Co. finished down more than 18 percent. Toyota Motor Corp., the world's biggest automaker, tumbled 7.9 percent after saying it would suspend production at its domestic plants through Wednesday.
AP Business Writer Yuri Kageyama contributed to this report.