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JAPAN’S government, which was facing a debt-to-GDP ratio of 200% this year, will set aside its debt concerns as it focuses on providing relief to the millions left homeless by the disaster. Credit ratings agencies Moody’s and S&P have held off reviewing the status of Japan’s debt until the fiscal consequences become clear, but both agreed that the cost of the catastrophe would add to weakening market confidence in the country’s sovereign debt.

THE EARTHQUAKE and resulting tsunami is expected to be the world’s most expensive natural disaster, with predictions that the repair bill will top $170 billion. Hurricane Katrina currently holds the record, having caused $123 billion worth of damage to the Gulf Coast of America and the city of New Orleans in 2005.

A RECORD ¥15tn was injected into the Japanese economy by its government yesterday, and a further ¥8tn followed today to help ease liquidity. It has already committed a further ¥10tn over the next eight days.

INDUSTRIAL output excluding energy in the Eurozone was better by 0.3% in January when compared to December, as manufacturing picked up in a number of core bloc members. On an annual basis, the increase was 6.6%, marginally greater than the expected 6.4%.

FITCH said it was keeping its AAA sovereign rating of the UK with a stable outlook, adding the rating was underpinned by a high value-added, wealthy and flexible economy.

MARKETS:

YESTERDAY the FTSE slumped to a three-month low as traders lost risk appetite and withdrew from anything linked to nuclear power. US markets also closed in the red, with stocks linked to nuclear power worst hit.

OVERNIGHT, the Nikkei dropped by more than 10% and the MSCI Asia Pacific Index fell by 5.5%. The broader Topix Index suffered its worst two-day decline since 1987 during record volumes of trade.

TODAY, Europe’s top share indexes are seen falling sharply at open, as more explosions in the damaged nuclear plants in Japan trigger a rise in radiation levels, and send investors running from riskier assets.

CURRENCIES:

THE YEN rose against many currencies as reports of further radiation leaks from a crippled Japanese nuclear power station increased, boosting speculation domestic investors will bring home overseas assets. Sterling hit session highs against the dollar and the euro on Monday after ratings agency Fitch affirmed the UK’s AAA rating.

ENERGY:

JAPAN’S earthquake has reduced the nation’s power capacity and will challenge economic recovery for some time into the future. Analysts fear that the country could be in a “power down” state for months, as the country relied so heavily on the output of the damaged nuclear plants.

COMMODITIES:

COPPER, aluminium and lead declined as equities slumped after Japanese Prime Minister warned the risk of a further radiation leak from a nuclear power plant at Fukushima is increasing. Gold and silver prices eased back as equities fell and speculators sold the precious metals to cover losses.

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