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Fear and uncertainty affect Japanese markets

Fear and uncertainty affect Japanese markets
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The economic impact of the earthquake and tsunami in Japan is also proving to be devastating.

Shares tumbled yesterday with the Nikkei closing nearly 11 percent down, its biggest one-day drop since the stock market crash of October 1987.

Nearly all this year’s gains have been wiped out – hundreds of billions of euros.

Liquidity is also an issue. The Bank of Japan has injected an additional 70 billion euros into the market, on top of 132 billion on Monday.

There are concerns this could lead to pressure to raise interest rates.

Predictions of another earthquake due this week have increased the fear and uncertainty.

But optimists have recalled the Kobe earthquake of 1995, when the markets went through a big fall followed by a slight bounce.