The destruction caused by the earthquake could knock one per cent off Japan's already declining economy, analysts said today.
Shares in Tokyo dropped 1.7% and the yen was down about 0.3% against the dollar in the aftermath of the disaster. Further falls are expected when the markets reopen on Monday.
Some car and semi-conductor factories in northern Japan were reported damaged and all ports were closed. However, because Tokyo and the other big Japanese conurbations suffered limited damage, the economic impact is likely to be short term.
In London shares in insurers specialising in catastrophe reinsurance were sharply lower in anticipation of huge claims from Japan. The biggest faller was Lloyd's of London reinsurer Omega. Its shares dropped eight per cent in early trading. In Zurich, shares in Swiss Reinsurance were also 8%. The FTSE 100 index slipped 38.64 points to 5806.67.
The Bank of Japan said it would take every measure possible to ensure the country's financial systems continued working normally. However, it will not be able to lower interest rates as they are already at 0%.
Tokyo's two main airports were shut but no British planes were stranded. British Airways and Virgin Atlantic cancelled three flights to Tokyo scheduled to depart today. Japan is Britain's biggest export market outside Europe and America.
