Japan's central bank on Monday rushed to bolster markets in the wake of the country's worst disaster since World War Two and although the authorities said it was too early to put a figure on the damage, critics said a stronger initial response had been needed.
Markets swooned at the shock of an 8.9 magnitude earthquake and a tsunami that may have killed more than 10,000 and has left millions of people without power, water or homes. The Nikkei average closed 6.18 percent lower on Monday.
At the same time, engineers were battling to prevent a nuclear meltdown at the Fukushima Daiichi complex owned by Tokyo Electric Power Co (TEPCO), where three reactors threatened to overheat in the worst atomic power accident since Chernobyl in 1986.
Investment bank Credit Suisse put economic losses from the quake at no less than $171 billion, although Finance Minister Yoshihiko Noda said it was too early to put together a firm figure to compile a supplementary budget.
Japan's central bank doubled its asset buying scheme to 10 trillion yen ($122 billion) and held interest rates at 0-0.1 percent after it earlier said it would pump a record 15 trillion yen into the banking system, though some economists said it could have done more.
A swathe of high profile Japanese manufacturers, including Sony Corp, Toyota Motor Co and Panasonic have shuttered production lines, with restart efforts hampered by quake aftershocks.
About a fifth of the country's nuclear power generation capacity has been shut down by the disaster. Thermal plants also shut down, forcing the world's third-biggest economy to instigate rolling blackouts to conserve energy.
The tremors will likely continue for one to two months, experts say, and are continuing now, so there's an immense amount of uncertainty and unclear points. said Masayuki Kubota, a senior fund manager at Daiwa SB Investments.
Economists said that the triple blow of quake, tsunami and nuclear accident is set to damage the already struggling economy harder and longer that initially expected.
Analysts have grown increasingly cautious about forecasting a quick economic rebound similar to that after the Kobe earthquake in 1995, thanks in part to Japan's indebtedness which at twice the size of gross domestic product means the government has less room for maneuver.
Some say a recession is possible.
Power supply is a critical factor, said Michala Marcussen, head of global economics at Societe Generale. If power production output is damaged in a sustainable fashion, that could have a durable impact on the economy.
TEPCO, the biggest power company in Japan, said on Sunday rolling blackouts would affect 3 million customers, including large factories and buildings from Monday onwards. It aims to end the blackouts by the end of April.
Policymakers face a monumental task reviving the economy, not only because of the scale of the disaster but because of their limited options.
After the Kobe earthquake, the government adopted an extra budget worth around 3 trillion yen.
This time, the government can't afford to spend as much as after the 1995 quake given Japan's dire fiscal situation, said Takuji Okubo, chief economist at Societe General in Tokyo, who reckons a more realistic figure to expect is 1 trillion yen.
The Bank of Japan (BOJ) had little room to move on rates, thanks to the legacy of the global financial crisis and years of economic stagnation, in stark contrast to New Zealand, where the central bank last week slashed interest rates by half a percentage point to 2.5 percent to support an economy hit by a 6.3 magnitude earthquake on February 22.
My initial impression is that the BOJ could have done more. Its traditionally reserved stance on policy easing remains in place even after the massive earthquake, said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
The BOJ also kept its economic assessment unchanged. The bank thus seems to be not fully taking account of strong uncertainty shrouding Japan.
The benchmark Nikkei stock average fell on concerns about rolling power blackouts hit the value of auto and electronics firms and the yen slid against the dollar.
Electronics giant Sony, maker of the Playstation gaming console, dropped 9.1 percent by the close of trade. The firm has suspended production at eight plants. Carmaker Nissan Motor Corp fell more than 9.5 percent after it shut down all four of its auto assembly plants in Japan.
It will take quite some time until investors' confidence in Japanese manufacturers returns. When we look back at the Kobe earthquake, it took about a week to get an overall picture of magnitude of the damage, said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.
The prospects of a massive recovery effort boosted contractor companies. Kajima Corp jumped more than 22 percent and Hazama Homes more than 19 percent.
The market impact of the disaster will be felt far beyond Japan.
Companies that trade with Japan face a loss of business and worries that governments will look at nuclear power less favorably. On Wall Street, S&P 500 futures were down 0.3 percent on Monday.
Almost 2 million households are without power in the freezing north and about 1.4 million lack running water.
Kyodo news agency said 80,000 people have been evacuated from a 20-km (13 mile) radius around the stricken Fukushima nuclear plant, adding to 450,000 evacuees from the quake and tsunami.
An explosion rocked the number 3 reactor on Monday although Jiji news agency said the core container was intact. TEPCO shares were untraded as sell orders outnumbered bids 200 times.
The complex was rocked by a first explosion on Saturday, which blew the roof off a reactor building. The government had said further blasts would not necessarily damage the reactor vessels.
TEPCO said on Monday it had reported a rise in radiation levels at the complex to the government.
Authorities had been pouring sea water to keep the fuel rods in the reactors cool. Nuclear experts said it was probably the first time in the industry's 57-year history that sea water has been used in this way, a sign of how close Japan may be to a major accident.
Injection of sea water into a core is an extreme measure, Mark Hibbs of the Carnegie Endowment for International Peace. This is not according to the book.
($1 = 81.915 Japanese Yen)
(Additional reporting Tokyo bureau: Writing by Neil Fullick and David Chance; Editing by Tomasz Janowski and Daniel Magnowski)