Japan under threat as nuclear crisis continues

The Australian sharemarket came back today after tumbling to a six-month low as news spread of more explosions at Japan’s Fukushima nuclear reactor in the nation’s northeast.

Investors wiped $30 billion from the value of Australia’s biggest companies yesterday following the explosions, as Japan braces itself for a possible nuclear catastrophe.

The nosedive came after Japanese Prime Minister Naoto Kan warned levels of radiation could pose a threat to civilians’ health, stating there is “fear everywhere”. Officials are still trying to locate 145 Australians in the affected region.

Meanwhile, Australian Prime Minister Julia Gillard said today Australian search and rescue workers have been forced to land at Fukushima airport, and two workers had since tested positive for “very low” levels of radiation.

On the economic front, the Australian dollar dipped below parity as commodity prices took a hit from the escalating disaster, with the Commonwealth Bank saying overnight trade was dominated by the ongoing crisis.

Uranium prices plunged 10% as officials in China and India called for reviews of their respective atomic energy programs in response to the crisis.

Shares in mining giants BHP Billiton and Rio Tinto were down more 2%, while the major banks’ shares also fell.

Economists now predict the Reserve Bank of Australia to leave interest rates on hold even longer due to the mayhem caused on global financial markets.

JP Morgan chief economist Stephen Walters, who has long held the view that the RBA will need to raise rates in May, concedes the probability of a rate rise has shifted to a later date in the wake of the disaster.

However, Walters also suspects the RBA will need to tighten monetary policy to manage the impact of the mining boom, which largely supports Australia’s terms of trade and national income.

“In fact, if demand for Aussie commodities rises as Japan rebuilds, and commodity prices rise in the near-term in anticipation of this… the resources boom would be even more supportive than before,” Walters said in a statement.

Macquarie Research senior economist Brian Redican believes this will have a negative impact on Australia in the short-term due to the difficulty of offloading ships if Japanese ports have been destroyed.

But he doubts demand for these products will be dented in the medium-term.

On a local front, tourism operators fear the Japanese tourism market – worth $1.5 billion annually to the Australian economy – will stagnate, particularly in Queensland where the local industry is already struggling in the wake of floods and Cyclone Yasi.

Tourism Australia chief Andrew McEvoy says the earthquake’s impact on the Japanese economy and consumer confidence is still unfolding.

“Consumer confidence plays a big role in outbound travel and that will have an impact on tourism and people’s willingness to travel to Australia,” McEvoy says.

Finally, Food Standards Australia & New Zealand is believed to be inspecting Japanese food imports for radiation contamination, following similar actions by Asian governments.