JAPAN'S central bank yesterday rushed to bolster markets in the wake of the country's worst disaster since World War II and although the authorities said it was too early to put a figure on the damage, critics said a stronger initial response had been needed.
Markets swooned at the shock of a 9.0-magnitude earthquake and a tsunami that may have killed more than 10,000 and has left millions of people without power, water or homes. The Nikkei average closed 6.18 percent lower yesterday.
At the same time, engineers were battling to prevent a nuclear meltdown at the Fukushima Daiichi complex owned by Tokyo Electric Power Co (TEPCO) , where three reactors threatened to overheat in the worst atomic power accident since Chernobyl in 1986.
Investment bank Credit Suisse put economic losses from the quake at no less than US$171 billion, although Japanese Finance Minister Yoshihiko Noda said it was too early to put together a firm figure to compile a supplementary budget.
Japan's central bank doubled its asset buying scheme to 10 trillion yen (US$122 billion) and held interest rates at 0-0.1 percent after it earlier said it would pump a record 15 trillion yen into the banking system, though some economists said it could have done more.
A swathe of high profile Japanese manufacturers, including Sony Corp, Toyota Motor Co and Panasonic have shuttered production lines, with restart efforts hampered by quake aftershocks.
About a fifth of the country's nuclear power generation capacity has been shut down by the disaster. Thermal plants also shut down, forcing the world's third biggest economy to instigate rolling blackouts to conserve energy.
"The tremors will likely continue for one to two months, experts say, and are continuing now, so there's an immense amount of uncertainty and unclear points." said Masayuki Kubota, a senior fund manager at Daiwa SB Investments.
Economists said the triple blow of quake, tsunami and nuclear accident is set to do more damage to the economy for a longer period than initially expected.
Analysts have grown increasingly cautious about forecasting a quick economic rebound similar to that after the Kobe earthquake in 1995, thanks in part to Japan's indebtedness, which at twice the size of gross domestic product means the government has less room to maneuver.
Some say a recession is possible.
"Power supply is a critical factor," said Michala Marcussen, head of global economics at Societe Generale. "If power production output is damaged in a sustainable fashion, that could have a durable impact on the economy."
TEPCO, Japan's biggest power company, said on Sunday rolling blackouts would affect 3 million customers, including large factories, from yesterday onwards. It aims to end blackouts by the end of April.
Policy makers face a big task in reviving the economy, not only because of the scale of the disaster but because of their limited options.
After the Kobe earthquake, the government adopted an extra budget worth around 3 trillion yen.
"This time, the government can't afford to spend as much as after the 1995 quake given Japan's dire fiscal situation," said Takuji Okubo, chief economist at Societe General in Tokyo, who reckons a more realistic figure to expect is 1 trillion yen.
The Bank of Japan had little room to move on rates, due to the legacy of the global financial crisis and years of economic stagnation.
"My initial impression is that the BOJ could have done more," said Masamichi Adachi, senior economist at JPMorgan Securities Japan.