Tokyo shares staged a rebound on Wednesday on bargain hunting after the biggest two-day sell-off on the Nikkei index for 24 years amid the world\'s worst nuclear crisis since Chernobyl.
But questions hang over the Nikkei\'s ability to reclaim the 16 percent losses it made on Monday and Tuesday with investors focused on the emergency at a stricken nuclear plant.
On Wednesday, the Nikkei closed up 5.68 percent, adding 488.57 points to 9,093.72.
For the third straight day the Bank of Japan pumped emergency funds into the financial system. It offered 5.0 trillion yen ($61.8 billion) for money markets as part of a total pledge of 13.8 trillion across other market functions.
The central bank put up eight trillion in same day funds Tuesday and a record 15 trillion on Monday to soothe sentiment and ensure firms can access cash. It has doubled to 10 trillion yen an earlier asset purchase scheme.
"There appears to be some buying back by hedge funds following yesterday\'s panic-selling," Cosmo Securities equity strategist Toshikazu Horiuchi told Dow Jones Newswires.
"But unless the nuclear power plant issues are resolved, the reconstruction efforts will not be able to start and only then can we gauge the impact (of the earthquake) on earnings," he added.
The yen firmed to 80.83 from 80.78 in New York late Tuesday.
The Fukushima plant northeast of Tokyo has suffered a series of blasts and fires since Saturday after it was rocked by the record 9.0 magnitude quake on Friday, triggering a 10-metre tsunami thought to have killed more than 10,000 people.
On Wednesday crews racing to prevent a meltdown suspended work due to radiation fears, with authorities pointing to possible damage to the number three reactor and the release of radioactive steam.
Despite the gains across the Nikkei shares in Tokyo Electric Power, or TEPCO, the operator of the stricken Fukushima nuclear power plant, dived by nearly 25 percent for the third consecutive day as a deluge of sell orders intensified.
Japan relies on its nuclear plants to provide around 30 percent of its energy needs, but post-quake shutdowns have led to power shortages prompting energy saving measures that have dimmed the usually neon-lit Tokyo.
With rolling power cuts planned for Japan, companies from big producers to suppliers of key components were forced to shut plants. World markets tumbled on Tuesday on fears for the global supply chain.
"Japan\'s transportation infrastructure has been crippled, electric power to factories is facing constant disruption and nuclear power capacity has been severely limited after last Friday�s devastating earthquake and subsequent tsunami," said Moody\'s Analytics.
"Given Japan plays a pivotal role in the global production supply chain, factory shutdowns are harming global output," it said.
However, exporters recovered ground on Wednesday as bargain hunters swept in.
In a rare piece of positive news for the economy, Toyota said it would resume partial production of car parts at seven plants in Japan on Thursday, after suspending all factories following the nation\'s biggest ever earthquake.
The plants will first begin making replacement parts for the domestic market, and on Monday restart production of parts to supply to its overseas factories.
On Wednesday Toyota Motor gained 9.13 percent to 3,345 yen and Sony gained 8.77 percent to 2,528.
Tohoku Electric Power was up 16.94 percent at 1,387 and Dai-ichi Life Insurance was up 5.27 percent at 125,700.
Japanese shares plunged 10.55 percent on Tuesday on a wave of panic-selling after Prime Minister Naoto Kan warned radiation leaked from the quake-hit plant had reached levels that posed a threat to health and told people within 10 kilometres of a 20 kilometre evacuation zone to stay indoors.
It was the biggest one-day fall since the Lehman crisis in 2008 at the beginning of the global financial crisis, compounding Monday\'s 6.18 percent tumble, and the worst two-day session since the 1987 crash.
But stocks soared on Wednesday despite a fresh fire and fears that containment pools holding spent fuel rods at reactor four had started to heat up.
If the water in the deep pools evaporates, it would expose the fuel rods, destroying them and releasing radioactive material into the atmosphere.
The government expects a "considerable" economic impact from the huge earthquake and devastating tsunami that plunged the nation into what Kan called its worst crisis since World War II.
A mammoth rebuilding task will be required in the aftermath of a disaster whose economic impact is widely expected to be at least as bad as that from the 1995 Kobe earthquake, which killed 6,400 people.
Economists expect growth to take a short term hit before being supported by rebuilding efforts later in the year.
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