2011-03-15

Bank of Japan Discovers Nuclear Reactors Cannot be Cooled by Liquidity Injections — Nikkei/Topix Down More than 10%, Have Biggest Two-Day Drop Since 1987 — Two More Explosions at the Nuclear Plant in Fukushima — Bloomberg Exposes Institutionalized Neglect Leading to This Tragedy

This morning, Tokyo time, the BoJ decided to almost double the size of their "liquidity injection" they announced yesterday: another $100 billion.

Yet, markets in Japan had a very sharp decline, closing with more than 10% losses, after reaching -14% intraday. This is the worst two day decline since the 1987 crash.

Financial analysts and economists are at it yet again, asking for the BoJ to do more, because they are not doing enough. Basically, they are asking the BoJ to provide to help them keep a floor under equity prices, a sort of Greenspan or Bernanke Put, but Japanese style. They are trying to protect their profits, by socialising the losses to the public, at the same time where an environmental and humanitarian catastrophe is unfolding.This is utterly disgusting. According to the various economists and analysts, the role of the BoJ has shifted from whatever economic mischiefs it was conducting, to include also making the equities market rise, continuously.
March 15 (Bloomberg) -- Japanese stocks dropped, with the Topix index completing its worst two-day plunge since 1987, and default risk jumped as Prime Minister Naoto Kan said the danger of further leaks from a nuclear power plant damaged by the nation’s biggest earthquake was increasing. Commodities fell.

The MSCI Asia Pacific Index slumped 5.4 percent at 3:05 p.m. in Tokyo. The Topix sank 9.5 percent and the cost of protecting Japan’s sovereign debt surged to a record. [...]

The Bank of Japan added 8 trillion yen ($98 billion) into money markets today, adding to yesterday’s record cash injection, to secure the nation’s financial stability following the March 11 temblor -- updated to a magnitude of 9, from 8.9, by the U.S. Geological Survey -- and subsequent tsunami. Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant was today rocked by two explosions and a fire.
[...]
Kansai Electric Power Co. tumbled 12 percent, pacing losses among utilities. Paladin Energy Ltd., a Perth-based company producing uranium in Africa, slumped 17 percent, extending yesterday’s 16 percent decline.

Tokyo Electric Power, whose shares plunged 25 percent, experienced a hydrogen blast at the Fukushima Dai-Ichi plant’s No. 4 reactor, where the company earlier reported a blaze, Japan’s Chief Cabinet Secretary Yukio Edano said at a briefing. Four of the complex’s six reactors have been damaged by explosions. Citizens living within a 30-kilometer (19 mile) radius of the plant should stay indoors, Kan said.
[...]

March 15 (Bloomberg) -- Tokyo Electric Power Co.’s stricken nuclear power plant was today rocked by two further explosions and a fire as workers struggled to avert the risk of a meltdown.

A hydrogen blast hit the Fukushima Dai-Ichi plant’s No. 4 reactor, where Tokyo Electric earlier reported a blaze, Japan’s Chief Cabinet Secretary Yukio Edano said at a briefing. Four of the complex’s six reactors have been damaged by explosions.

Prime Minister Naoto Kan appealed for calm as he said the danger of further radiation leaks was rising at the crippled nuclear facility, 135 miles (220 kilometers) north of Tokyo. Sea water is being pumped to cool the reactors and prevent the uncontrolled release of radioactive material.

March 15 (Bloomberg) -- [...] BOJ Governor Masaaki Shirakawa’s pledge yesterday to secure financial stability and prevent investors from becoming more risk averse was overwhelmed today, with the Topix index of stocks suffering its worst two-day drop since the 1987 crash. [...] 
“The market’s chaos won’t calm down unless the BOJ will take more bold actions,” said Susumu Kato, chief economist for Japan at Credit Agricole CIB and CLSA in Tokyo. “A further plunge in stocks will pressure the BOJ into additional easing.”
[...]
“The Bank of Japan is missing the chance of doing something more aggressive,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase in Tokyo, who used to work at the central bank, said yesterday. “What the BOJ should do now is to anchor investors’ sentiment” with accelerated purchases in its program, he said.
[...]
Should the equity market keep tumbling, Japan’s central bank may increase its purchases of risk assets under its asset- buying program, said Norio Miyagawa, senior economist at Mizuho Securities Research and Consulting Co. in Tokyo.

“If stocks continue to drop more and the yen gains further, it will probably have an adverse effect on corporate sentiment and household consumption,” Miyagawa said. “So the BOJ may need to take further action.”

Jim O’Neill, the London-based chairman of Goldman Sachs Asset Management, said the yen remains overvalued, giving the BOJ cause for more robust monetary stimulus.

There is now clearly a case for being bold to ensure a speedy recovery from this tragedy,” O’Neill wrote in a note to clients yesterday. “Events certainly require it.”
Last, here's William Pesek's column on Bloomberg, doing a very good job at summerizing all the neglect that led to such a nuclear disaster:
March 15 (Bloomberg) -- In high-tech, hypermodern Tokyo the most sought-after items are decidedly primitive: candles, flashlights, surgical masks and duct tape.

For that, we have more than just Friday’s deadly earthquake and tsunami to blame but also the nation’s shameful nuclear-safety record. It is boomeranging on all of us 126 million Japan residents. 
[...] Yet Japanese have been put at risk by years of institutionalized neglect.

Neither has the information flow inspired much trust. Government officials say don’t worry, radiation risks are “containable” and at the same time they tell people to evacuate. If we learned anything from the subprime-loan crisis, it’s that anytime a public official uses the C-word it’s time to run for the hills.
[...]
Here, Tokyo Electric Power Co.[...] is the poster child of distrust. In 2002, whistleblowers revealed abuses that forced it to say it had faked reports on repairs since the 1980s. Its chairman and president resigned and all 17 of its reactors were temporarily shut by government inspectors.

Amidst the latest accident, in Fukushima, Tokyo Electric is facing criticism for responding slowly. What a shock! This latest fiasco further damages the industry’s reputation after a string of embarrassments over the last 12 years.

Tokyo Electric is flushing three reactors at the plant with water after cooling systems failed and a blast tore through a containment building. It comes less than four years after a quake shut another plant run by the utility and in the wake of industry scandals involving faked reports and fatal accidents.

In 1999, two workers were killed by radiation exposure at a fuel processing plant. They actually used buckets to estimate a uranium mixture that caused a blue flash of light and a chain reaction that went unchecked for 20 hours.
[...]
In 2004, a burst pipe at a reactor run by Kansai Electric Power Co. killed five workers. The burst-pipe section had been omitted from safety checklists and hadn’t been inspected for 28 years. Then 2007 brought fresh revelations that utilities had regularly doctored safety records.

Unfolding events at Fukushima aren’t the first quake- related accident for Tokyo Electric. In July 2007, a 6.8 magnitude temblor caused a fire and radiation leaks that shut down the Kashiwazaki Kariwa nuclear plant, the world’s biggest. The government had failed to conduct sufficient checks for seismic faults at the site.
[...]
Lacking oil and natural resources, Japan relies on 54 nuclear reactors to supply 30 percent of its power. Prime Minister Naoto Kan says exports of nuclear technology from Toshiba Corp. and Hitachi Ltd. could help revitalize the economy and meet greenhouse-gas emissions targets.
[...]
Please note that William is asking, as a solution, for more government intervention, regulation, and action which are not ideas that I embrace.

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