Bank of Japan emergency funding hits nearly $700B

TOKYO – Japan’s central bank continued to flood money markets with cash on Wednesday, bringing its total emergency funding to nearly $700 billion as it tries to soothe fears about the economic impact of the catastrophic earthquake, tsunami and unfolding nuclear crisis.

The latest offer of Bank of Japan funding came as stock markets bounced back from a steep sell-off that sent the benchmark Nikkei down 20 percent over two days to an almost two-year low. The index finished up 5.7 percent at 9,093.72.

The Bank of Japan conducted emergency operations for the the third day in a row, bringing its total liquidity injection to 55.6 trillion yen ($688.3 billion) since Monday. By flooding the banking system with money, it hopes banks will continue lending and meet the likely surge in demand for post-disaster funds.

The government on Wednesday ordered emergency workers to withdraw from a stricken nuclear plant amid a surge in radiation, temporarily suspending efforts to cool the overheating reactors. The nuclear crisis has triggered international alarm and partly overshadowed the human tragedy caused by Friday’s 9.0-magnitude earthquake and the subsequent tsunami.

Kyohei Morita, chief economist at Barclays Capital Japan, estimates disaster losses of about 15 trillion yen ($186 billion) based on currently available information. That represents about 3 percent of Japan’s gross domestic product.

“The latest earthquake is expected to inflict more human and physical damage” than the Kobe quake in 1995, Morita said in a report.

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 local automotive industry is facing acute and unprecedented problems relating to component and power supply shortages,” said Tim Urquhart, an analyst with IHS Global Insight.

Around the country, people queued for fuel and emptied supermarket shelves of food and other necessities.

As far away as Hong Kong, shoppers were buying up Japanese milk powder, fearing future supplies could be contaminated by radiation.

The head of Japan’s biggest business lobby, the Nippon Keidanren, called on the government to establish a strong command center to ensure swift relief and recovery.

“I ask the government for leadership,” he said. “I hope both the ruling and opposition parties will work together to implement appropriate and swift measures.” –AP