Japan Central Bank Pledges to Ensure Stability After Quake, Tsunami Strike

Prime Minister Naoto Kan mobilized Japan’s Self-Defense Forces and the central bank pledged to ensure financial stability after a magnitude 8.9 earthquake struck off the coast of Sendai, a city of 1 million, causing damage across the east coast of Japan. “I call on citizens to act calmly,” Kan told reporters in Tokyo after convening his emergency disaster response team. “The Self-Defense Forces are already mobilized in various places. The government is making its utmost effort to minimize the damage,” he said, saying later in a news conference that the impact was widespread.
The Ministry of Finance said it’s too soon to gauge the economic impact of the temblor, the world’s biggest in more than six years. Japan’s central bank set up an emergency task force and said it will do everything it can to provide ample liquidity. The BOJ, which has already cut its benchmark rate to zero in an effort to end deflation, had last month said the economy was poised to recover from a contraction in the fourth quarter.
“It’s early days but the horrific events in Japan bear very close watching from a financial perspective, given the bloated problems in Japan’s public sector,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, said in an e-mailed note. Kan, 64, had been in the midst of a political battle to approve financing for his budget as credit- rating companies warn the nation’s government to rein in the world’s biggest public debt.
Stocks Slide
Japan’s stocks slid 1.7 percent in Tokyo today as the earthquake struck less than half an hour before the market closed. The yen advanced 0.2 percent to 82.77 per dollar as of 5:07 p.m. in Tokyo. The MSCI Asia Pacific Index dropped 1.4 percent as of 5:22 p.m. in Tokyo, with losses accelerating after the quake. Futures on the Euro Stoxx 50 Index fell 1 percent.
The central bank said in a statement that its settlement system was working and that it was able to settle all accounts today without disruption.
Televised footage showed a tsunami striking northeast Japan. Outside of Tokyo, Narita airport, the area’s main international gateway, closed, Kyodo News reported. Haneda, the main domestic airport, was reopened after closing earlier, according to Kyodo.
“Major damage occurred in the Tohoku area,” Kan said in a nationally televised address, referring to the northern region of Honshu, Japan’s biggest island. “We will work with all our might to ensure people’s safety and minimize the damage. I ask everyone to pay attention to TV and radio reports and act calmly. Some nuclear power plants automatically shut down, but so far we haven’t confirmed any leakage of radioactive material.”
The quake struck at 2:46 p.m. local time 130 kilometers (81 miles) off the coast of Sendai, north of Tokyo, at a depth of 24 kilometers, the U.S. Geological Service said. It was followed by a 7.1-magnitude aftershock at 4:25 p.m., the service said. Aftershocks continued to affect office buildings in Tokyo as recently as 5:21 p.m. local time.