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Financial Focus

JAPANESE markets fell sharply as traders sought to offload exposure to the devastating Japanese earthquake.

THE BANK of Japan (BoJ) injected ¥15 trillion ($183bn) into the economy this morning to shore up the banking system. It is thought that it has invested in assets ranging from government bonds to private debt. In addition to the ¥15 trillion, the BoJ offered to buy ¥3 billion of government bonds from lenders in repurchase agreements. An emergency budget will be announced today, although monetary options are limited as interest rates are almost zero already.

ANALYSTS expressed doubt in Japan’s ability to cope with the costs of Friday’s earthquake and tsunami, saying that the timing of the disaster could not have been worse.

MARKETS:

OVERNIGHT, the Nikkei plummeted, despite the Bank of Japan increasing its asset-buying programme. The index went as low as 7% at one stage, before settling back to just over 6%. Hong Kong’s Hang Seng made a small gain of 0.2% and the Shanghai Composite was flat, as investors avoid big bets in the wake of the disaster.

TODAY, financial bookmakers expect to see the main European stock indexes falling, adding to last week’s sell-off as investors worry about the Japanese situation.

CURRENCIES:

THE YEN fell against the dollar having touched a four-month high as traders sold off foreign assets to increase their stock of yen. The Japanese government’s input of ¥15 trillion into the economy, and Prime Minister Naoto Kan’s threat to take firm action against speculative currency trading, erased the early advance of the yen.

ENERGY:

JAPAN’S reliance on a third of its power from nuclear sources will mean that the country faces rolling blackouts for 3m homes from this morning to prevent an all-out power outage on the damaged grid. Japan is already the world’s third largest oil consumer, and the global energy market is gearing up to replace large amounts of the nuclear power, although any surge in demand is likely to be offset by lower consumption due to factory closures.

COMMODITIES:

DEMAND for industrial metals in Japan, Asia’s biggest buyer of aluminium, may tumble as factories shut because of damage and power cuts. Aluminium for three-month delivery dropped 0.7%, and copper declined by 0.8% on the London Metals Exchange. Japanese metals producers have also announced shutdowns, with companies saying that it is not clear when they will reopen.

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