Nearly US$290 billion (Dh1.06 trillion) was wiped off the market capitalisation of the Tokyo Stock Exchange yesterday in the first full trading session since Japan's devastating earthquake and tsunami.
Japanese stocks fell $287bn, the most in more than two years on high volumes not seen since the Second World War as investors bailed out of companies expected to be the worst hurt by the disaster.
Tokyo Electric Power, the region's biggest power generator, dropped 24 per cent. Toshiba, the products of which include nuclear reactors, was down 16.2 per cent. The car maker Toyota declined 7.9 per cent.
The declines came even after the Bank of Japan injected a record ¥15 trillion (Dh671.63 billion) into money markets to try to defend the already fragile economy.
The bank's intervention included doubling the size of its asset-buying scheme to ¥10tn while keeping interest rates at 0.1 per cent.
Japan's Nikkei 225 Stock Average declined 6.2 per cent to 962.49 points, its sharpest one-day decline since December 2008.
The country's wider index, the Topix, slumped 7.4 per cent to 846.96 points, hitting record high trading volumes as investors sold blue chip companies affected by huge power shortages around the country.
"People are still trying to assess the overall impact," said Haissam Arabi, the chief executive of the asset management company Gulfmena Alternative Investments in Dubai.
"It may take a number of days until analyst reports start surfacing, which would bring clarity."
The effects were not nearly as bad in other Asian markets, which were relatively subdued yesterday. The Hang Seng Index gained 0.4 per cent to close at 23,345.88 points, while the Shanghai Composite Index rose 0.1 per cent to 2,937.62.
"Neighbouring markets haven't reacted as negatively, which means investors are still pricing in the first impact," Mr Arabi said. "Questions remain how power shortages in Japan will impact the price of oil."
As Japan is the third-biggest economy in the world, the effects could be felt far beyond Asia if the reconstruction becomes a drag on the country's growth.
Some analysts are projecting increased demand for natural gas as Japan moves to replace nuclear energy.
Yesterday's declines in Japanese stocks followed several months of solid performances. The Nikkei had climbed 13 per cent in the five months before the earthquake on Friday, while the MSCI's index of Asia-Pacific shares had risen only 1.7 per cent.
A handful of Japanese stocks rose sharply yesterday. Construction companies jumped as investors expected the sector to benefit from the country's rebuilding efforts.
The biggest gainers were the civil engineering company Kajima, up 22.1 per cent, and Taiheiyo Cement, which rose 21.2 per cent.
Insurance companies, which are likely to face heavy claims for damage to property and infrastructure, fell sharply.
The yen initially rose towards a record high against the US dollar, trading at levels unseen since 1995, but quickly retreated. The dollar was at ¥81.80 late yesterday, about 0.1 per cent lower.
In the bond market, the cost of insuring Japan's sovereign debt rose by about 10 basis points to 91, close to peaks of 100 basis points reached last year during the euro-zone crisis.
Analysts said it was difficult to say if the sell-off would continue today.
"I really can't tell the extent of possible sales as this is not the normal market condition," said Hiroshi Arano, an adviser at Mizuho Asset Management in Tokyo.