Japan pumps $184B into quake-shocked economy

TOKYO -- Japan's central bank pumped a record $184 billion into money markets and took other measures to protect its struggling  economy Monday, as the Tokyo stock market nose-dived after a devastating earthquake and tsunami.

As damaged vehicles from automakers' facilities on Honshu island smoldered after the earthquake, tsunami and fires, stock in Toyota Motor Corp., the world's biggest automaker, tumbled 7.9 percent. The company said it would suspend manufacturing at its plants through Wednesday -- a production loss of 40,000 cars. Other manufacturers forced to halt production, such as Sony Corp. and Honda Motor Co., also saw stock slumps.

The benchmark Nikkei 225 stock average slid 6.2 percent in its first day of trading since the 8.9-magnitude quake centered on northeastern Japan struck Friday, triggering enormous waves that swamped towns and killed thousands.

Escalating concerns about the financial and economic fallout of the disaster triggered a plunge that hit all sectors of the stock market. The broader Topix index lost 7.5 percent.

The Bank of Japan moved quickly to try to keep financial markets calm. By flooding the banking system with cash, it hopes banks will continue lending money and meet the likely surge in demand for post-earthquake funds.

Later in the day, the central bank's nine-member policy board gathered for a shortened meeting and voted unanimously to ease monetary policy. It will expand the size of an existing program to buy assets -- such as government and corporate bonds -- by $486.4 billion. It also decided to keep its key interest rate at virtually zero.

Credit Suisse economist Hiromichi Shirakawa estimated the damage at up to $183 billion and other analysts warned the economy will shrink for two straight quarters. That represents a painful blow for the economy, which has been ailing for two decades, barely managing to eke out weak growth between slowdowns. It is saddled with a massive public debt that, at 200 percent of gross domestic product, is the biggest among industrialized nations.

"People might see an already weakened Japan, overshadowed by a growing China, getting dealt the finishing blow from this quake," said Koetsu Aizawa, economics professor at Saitama University, north of Tokyo.

Billions of dollars are expected to be needed to rebuild homes, roads and other infrastructure requiring public spending that will benefit construction companies but add to the national debt.

The economy will eventually get a boost from reconstruction but "this does not mean that Japan is better off," said Julian Jessop, chief international economist at Capital Economics in London. It's a quirk of accounting that destruction of assets is not counted as a reduction in the economy but replacement of those assets boosts economic activity, he said.