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Japan quake may be world's costliest disaster

By Kevin Voigt, CNN
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Zakaria on devastation in Japan and economic ramifications
  • Japan's central bank will inject a record 15 trillion yen ($183 billion) into the economy
  • The Nikkei 225 fell by more than 6% in trading on Monday
  • Disaster comes as Tokyo struggles with highest public debt in developed world
  • Losses from the disaster will total at least $100 billion, according to one estimate

(CNN) -- The devastating earthquake and tsunami in Japan will rank among the costliest natural disasters on record, experts predict.

Japan's central bank announced plans Monday to inject a record 15 trillion yen ($183 billion) into the economy to reassure global investors in the stability of Japanese financial markets and banks. The Bank of Japan also earmarked an additional 5 trillion yen ($61 billion) in aid for risky assets in an effort to bolster market confidence shaken by the disaster.

Still, Japanese markets dropped sharply on Monday, the first trading day since the disaster. The benchmark Nikkei 225 was down more than 6.2%.

The drop was the largest single day fall since December 2008 during the financial crisis.

The disaster comes at a difficult time for the fragile Japanese economy, which slipped to the world's third largest behind China in 2010. Japan's export-driven business was hit by the financial crisis and a strong yen, which hurt profits from sales abroad.

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The rebuilding from the quake also will add to Japan's towering load of public debt; it is nearly twice the size of its total GDP and the highest in the developed world. S&P downgraded Japan's long-term credit ratings in January, citing its high fiscal deficits.

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The TOPIX futures index halted trading around 9 a.m. for 15 minutes as trading quickly spiralled down. "The stoppage was a result of a circuit breaker mechanism, triggered "if shares fall beyond a specific range," said Andrew Wong of the Tokyo Stock Exchange.

Losses from the disaster will total at least $100 billion, including $20 billion in damage to residences and $40 billion in damage to infrastructure such as roads, rail and port facilities, catastrophe modeling firm Eqecat estimated, according to CNNMoney.

CNNMoney: Japanese earthquake could be most expensive ever

Another firm, AIR Worldwide, estimated that losses covered by insurance could reach between $15 billion and $35 billion from the earthquake alone, CNNMoney said. It did not estimate losses from the tsunami or the damage to the the Fukushima Daiichi nuclear plant in northeastern Japan.

"If claims come in at the middle of that range, the cost of the disaster would surpass all other natural disasters besides 2005's Hurricane Katrina," according to a Barclay's Capital research note released Monday. "Katrina losses cost the insurance industry around US$45 billion."

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Stocks from automotive giant Toyota fell more than 8%, while Nissan fell 9% and Honda dropped more than 6%.

Toyota shut production at manufacturing plants and affiliated suppliers nationwide until end of day Wednesday.

"We are placing priority on making sure that we are supporting the relief efforts in the region affected and ensuring the safety of all our employees," said Dion Corbett, Toyota spokesperson.

Toshiba Corp., maker of nuclear power plants, fell more than 16% as concerns escalated at several nuclear power plants in the aftermath of Japan's largest quake on record and powerful tsunami.

Tokio Marine Holdings, the insurer, fell more than 12%.

Miyagi Prefecture, the area hardest hit by the earthquake, makes up about 1.7% of the population of Japan and accounts roughly for the same amount of the nation's total economic output, said Richard Jerram, an analyst at Macquarie Research. By contrast, the area struck by the 1994 Kobe earthquake "made up almost 4.0% of (Japan's) GDP and the importance of its port and its geographic position between Osaka and Western Japan meant that the disruption was significant," Jerram said.

Still, the rolling power blackouts, looming nuclear problems and damage to infrastructure add uncertainty to predicting the total impact to one of the world's largest economies. "It's very hard to make a forward-looking assessment, because you just don't know," Jerram said.

CNN's Pamela Boykoff, Ramy Inocencio and CNNMoney's Chris Isodore contributed to this report

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