BOJ ready to support markets

Tokyo, Mar 12 (Bloomberg): Japan's central bank pledged to ensure financial stability after the nation's strongest earthquake on record forced Toyota Motor Corp to shut some plants, shut down oil refineries and sparked a plunge in stocks. Yesterday's magnitude 8.9 earthquake struck off the coast of Sendai, a city of 1 million in the northeast, unleashed a tsunami as high as 10 meters (33 feet) that engulfed towns along the coast. More than 500 people have been reported killed. The Tohoku region, which includes Sendai, accounts for about 8 per cent of the country's gross domestic product, according to the Cabinet Office figures. The disaster may curb Japan's recovery from an economic slump in the fourth quarter as Prime Minister Naoto Kan struggles to convince investors about his ability to tackle the world's largest public-debt burden. While the Finance Ministry said it's too soon to gauge the quake's economic impact, the Nikkei 225 Stock Average dropped 1.7 per cent yesterday. "The nagging question in the background here, given that public finances are in such a weak condition already, is: Is this going to push Japan over the edge," said Brendan Brown, chief economist at Mitsubishi UFJ Securities International in London. "If we're talking about less than 5 per cent of GDP, then it probably wouldn't be the make or break factor." Oil for April delivery tumbled $1.54 to $101.16 a barrel on the New York Mercantile Exchange, the lowest settlement since March 1. "This is in response to the tsunami in Japan and the lack of the Day of Rage in Saudi Arabia," said Hamza Khan, an analyst with the Schork Group Inc., a consulting company in Villanova, Pennsylvania. "If the Japanese refineries are down, then we're going to see lower demand for crude oil." The temblor set ablaze a Cosmo Oil Co refinery near Tokyo and closed at least three others, temporarily curbing demand for crude in Asia's second-largest oil-consuming nation. Prime Minister Naoto Kan, returning from an inspection of the devastated area today, said he would mobilize 50,000 Self Defense Force personnel to aid the relief effort. "It's very important to make as much progress as possible in the rescue effort in this first day." The Bank of Japan, which has already cut its benchmark rate to zero in an effort to end deflation, set up an emergency task force and said it will do everything to provide liquidity. The central bank said its settlement system was working and that it was able to settle all accounts without disruption.