Japanese leaders tried to calm panicky financial markets on Tuesday as a deepening nuclear power crisis looked certain to increase the toll on an economy already convulsing from a massive earthquake and tsunami.

Tokyo's stock market plunged more than 14 percent at one point after the stricken Fukushima nuclear power plant was hit by two explosions and a grim-faced Prime Minister Naoto Kan warned the nation that radioactivity levels had become significantly higher.

Even before Tuesday's dramatic events, economists had estimated that recovery and reconstruction costs would reach at least $180 billion, or 3 percent of the economic output of the world's third-biggest economy. Others suggested the cost could amount to 5 percent of output.

In the face of the country's biggest crisis since World War II, Japanese leaders urged calm as the stock market fell.

Japan's production and the economic power have not fallen. I think the market confusion will calm down in a short time, Economics Minister Kaoru Yosano said at a press conference.

He said there was no reason to close Tokyo markets and that the economy was in good shape but acknowledged the government and the Bank of Japan needed to ease anxiety among the public and investors.

Finance Minister Yoshihiko Noda said the market's fall was the response to temporary factors.

The prime minister called for those within 30 km (18 miles) of the facility north of Tokyo to remain indoors, underscoring the worsening of Japan's nuclear crisis, the world's most serious since the Chernobyl disaster in Ukraine in 1986.

There has been a fire at the No. 4 reactor and radiation levels in the surrounding area have heightened significantly. The possibility of further radioactive leakage is heightening, Kan said in an address to the nation.

We are making every effort to prevent the leak from spreading. I know that people are very worried but I would like to ask you to act calmly.

Still, markets reflected a mounting fear about the radiation risk in a country already reeling from the 9.0 magnitude quake and tsunami.

The Fukushima nuclear power plant at the center of the crisis, operated by Asia's biggest utility Tokyo Electric Power Co, is 240 km (150 miles) north of Tokyo, the political and commercial heart of the country.

TEPCO shares have hardly traded as sell orders flooded the market. But at the close of trading on Tuesday, it was down 42 percent from its Friday close.

MARKETS TUMBLE

The Nikkei closed down 10.5 percent, its biggest percentage fall since October 2008 during the height of the financial crisis. More than $600 billion in market value has been wiped out since Friday.

At Tuesday's lows, the market was down a fifth since Friday.

All focus is on the nuclear crisis. In the situation where the crisis appears to be worsening, foreign investors, domestic fund operators are pulling out from Japanese shares, Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo, said.

The Bank of Japan stepped in to keep the banking system stable for a second day, offering $98 billion of cash if needed. It lined up a record $183 billion in same-day funds on Monday and doubled an asset-buying scheme to support prices.

Still, the economic shocks look set to deepen, raising doubts that the economy can bounce back quickly like it did following the 7.3 magnitude Kobe earthquake in 1995.

The triple disaster has left a gaping hole in power capacity, leading to rolling three-hour blackouts.

It looks like Japan could be in a 'power down' state for a protracted period, said Stephen Roberts, Nomura's chief economist for Australia. That's what makes it different from other major quakes.

People tend to compare it to Kobe and assume a v-shaped recovery, but Kobe never caused this level of power disruption, he added. It means any proper recovery could be delayed right out to the fourth quarter.

GLOBAL IMPACT

Car makers, shipbuilders and technology companies worldwide were scrambling to secure suppliers after the disaster shut a swathe of factories in Japan, disrupting the global supply chain.

Prices for key technology components spiked and global supply disruptions were expected to last for months. Research firm IHS iSuppli said the disaster could result in significant shortages of some electronic parts and lead to big price hikes.

Indeed, spot prices of NAND flash memory chips jumped 20 percent on Monday, while DRAM memory chips rose 7 percent.

Japan accounts for one-fifth of the world's semiconductor production, including about 40 percent of flash memory chips used in everything from smartphones, tablets to computers.

While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices, iSuppli said.

Ports handling as much as 7 percent of the country's industrial output were damaged in the quake and tsunami, affecting deliveries of oil and gas, containers and cars, among others.

Tokyo and all ports south of the capital were operating normally after briefly shutting following the quake.

After the news of higher radiation levels, Air China said it had canceled flights from Beijing and Shanghai to Tokyo.

Tokyo travel agents reported a rising number of queries from foreigners seeking to leave the country, although the capital's Narita airport said there had not been a surge in passengers traffic.

The nuclear power crisis has had a ripple affect globally.

Germany suspended an agreement to extend the life of its nuclear power stations, Switzerland put on hold some approvals for nuclear power plants, and Taiwan's state-run Taipower said it was studying plans to cut nuclear power output.

In the United States, the White House said that President Barack Obama remained committed to keeping nuclear as part of the U.S. energy mix.

But analysts predicted that a $10 billion nuclear plant expansion by NRG Energy Inc in South Texas may now fail to get government loan support.

Shares in conglomerate U.S. General Electric, which makes nuclear plant equipment, fell 2.2 percent, while Canada's Cameco, the global No. 2 uranium producer, lost 13 percent, and Uranium One, fell nearly 28 percent.

Engineering and construction company Shaw Group, part of a consortium that plans to build several plants globally, tumbled 9 percent.

In Japan, shares in Toshiba Corp, which had ambitions to export its nuclear power technology, were swamped by sell orders before it closed down 19.5 percent after a 16 percent tumble on Monday.

(Additional reporting Miyoung Kim in Seoul, Editing by Lincoln Feast & Kim Coghill)