Japan's equity futures fell 6 percent on Monday as investors took stock of the economic damage from the massive earthquake and tsunami that devastated the country's northeastern region.

The yen also slid against the dollar, reversing earlier gains in a volatile morning in which dealers were cautious about being able to settle trades in thin trading conditions.

Japanese automakers, electronics firms and oil refiners saw their share prices drop as much as 12 percent after having to shutter key factories after Friday's earthquake and tsunami, which are feared to have killed more than 10,000 people and severely damaged infrastructure.

Analysts say the country's economy is likely to suffer a setback at least in the near-term, and risk modeling company AIR Worldwide has said last week's earthquake could lead to insured losses of nearly $35 billion.

The recent major earthquake is bound to exert downward pressure on Japanese equities as a whole over the near term, analysts at Nomura said in a research note.

Based on declines after the Kobe earthquake, we expect the TOPIX and the Nikkei average to decline and then rebound in ranges around 850-900 and 9,500-10,000, respectively, they said, referring to a 1995 earthquake that struck western Japan.

Japan's Nikkei stock futures opened down about 7 percent compared to the regular session close on Friday. After paring some losses, the most actively traded June futures contract was down 4.8 percent at 9,710.

Futures for the broader TOPIX index were down 6.2 percent and were halted because of the big gap between buy and sell orders, an indication of illiquid conditions that make pricing assets difficult.

The benchmark Nikkei index <.N225> fell 4 percent to 9,843.95, with technology companies such as Kyocera Corp <6971.T> and Canon Inc <7751.T> the biggest drags on the market.

We're seeing lots of noise, lots of funny moves. This is the market in which you have to stay sidelined for now, said Michael Kretschmer, senior portfolio manager from Pelargos Capital based in Europe. We're not seeing any panic selling. I'm in Europe but monitoring the Nikkei closely, he said.

Worries about the possible hit to the economy and the slide in Tokyo shares gave a lift to Japanese government bonds, with the lead June 10-year JGB futures surging more than half a point to 139.77.

The yen rallied broadly in early Asia but quickly pared gains in volatile trade as nervous traders waited to see what action Japanese officials will take to keep markets calm after Friday's quake and tsunami.

A fund manager at a Japanese trust bank said that most Japanese traders were sidelined this morning because there was some uncertainty about whether trades would be settled properly with many banks lacking manpower due to disruptions to public transport.

The Bank of Japan, which holds a policy meeting on Monday, injected 7 trillion yen into the money market via a same-day operation. The central bank said the fund injection was aimed at helping smooth fund settlement.

The dollar was last up 0.5 percent compared to late U.S. trade on Friday at 82.20 yen.

The yen had risen sharply on Friday on talk of repatriation flows as the disaster unfolded.

(Additional reporting by Yoshiko Mori and Hideyuki Sano, Writing by Masayuki Kitano; Editing by Kevin Plumberg)