(Updates prices)
* Yen surges to record 76.25 per dollar before pulling back
* Nikkei falls 1.4 percent, MSCI Asia ex-Japan off 0.9
percent
* S&P erases gains for the year amid Japan nuclear crisis
* European shares seen down 0.3-0.8 percent
* Brent crude nears $111 a barrel on Middle East unrest
By Alex Richardson
SINGAPORE, March 17 (Reuters) - The yen surged to a record
high against the dollar and Asian shares fell on Thursday after
U.S. officials said the risk of a catastrophic radiation leak
from an earthquake-stricken Japanese nuclear plant was rising.
The unfolding disaster in Japan has sent fear coursing
through financial markets, hitting stocks and other riskier
assets such as commodities while boosting safe-haven government
debt, as investors struggle to get a fix on the scale of the
crisis and the potential damage.
Operators of the Fukushima Daiichi nuclear complex, 240 km
(150 miles) north of Tokyo, dumped water from helicopters on
Thursday in an increasingly desperate attempt to cool
overheating reactors at the plant.
"Fear is the only factor driving the market today and if you
look at news about temperatures rising, things exploding, you're
not going to trade calmly, right?" said Koichi Ogawa, chief
portfolio manager at Daiwa SB Investments.
European stock markets were seen falling for a seventh
straight session, with financial bookmakers calling Britain's
FTSE 100 down 0.3 percent, Germany's DAX down
0.5 percent and France's CAC 40 down 0.8 percent.
However, U.S. stock market futures rose 0.5 percent
after worries about Japan's worsening nuclear crisis sparked
hefty losses on Wall Street overnight.
Finance ministers and central bankers from G7 countries were
expected to discuss the impact of Japan's deepening crisis in a
conference call early on Friday Asian time (2200 GMT on
Thursday), but traders thought any joint intervention in
currency markets was unlikely.
Hundreds of billions of dollars have been wiped off global
stock markets since Japan's northeast coast was devastated by an
earthquake and tsunami on Friday and several nuclear reactors
began overheating.
The yen spiked around 4 percent against the dollar,
initially driven by speculation that Japanese insurers would
have to repatriate funds to pay for massive claims following
last Friday's 9.0 magnitude quake and the devastating tsunami it
triggered.
That run-up set off a wave of stop-loss and options-related
selling that sent the currency rocketing as far as 76.25 to the
dollar on electronic trading platform EBS in
increasingly chaotic trading, before easing to around 79.25.
"It's mayhem out there," said one trader at an Australian
bank in Sydney as liquidity evaporated and bids were pulled.
"The yen's been moving a big figure a second on occasions. A lot
of people are crying out for the central banks to step in."
INTERVENTION ALERT
Japan's Finance Minister Yoshihiko Noda blamed speculation
for the spike in the yen and said he would closely watch market
action. Markets usually interpret such comments as a reminder
that the authorities could intervene to curb the currency.
"There's a real possibility that authorities would intervene
to calm the markets, though I don't think it will be heavy,"
said Junya Tanase, a foreign exchange strategist at JPMorgan
Chase in Tokyo.
Japan's Nikkei fell 1.4 percent, with big exporters
such as industrial robot maker Fanuc and car maker
Toyota , whose overseas earnings are eroded by a
stronger currency, taking the most points off the index.
Fanuc fell 4 percent and Toyota 2.2 percent. The Nikkei had
been down more than 4 percent earlier in the day, but clawed
back some ground as foreign investors bought shares in some
beaten down blue-chips.
Japanese stocks had suffered their biggest two-day rout
since the 1987 crash on Monday and Tuesday before rebounding
nearly 6 percent on Wednesday.
Asian shares outside Japan were down about
0.9 percent, with Hong Kong's Hang Seng down 1.8 percent.
Benchmark 10-year Japanese government bond futures
jumped in early trade before reversing course to close a
fraction lower.
"Fast money accounts are making a killing in this volatile
market moved by rumour after rumour," said a trader at a foreign
bank in Tokyo.
U.S. Treasuries firmed, with the 10-year yield slipping
towards a three-month low.
The CBOE Volatility Index or VIX , Wall Street's
favourite measure of investor fear, rose 20.89 percent to close
at 29.40 on Wednesday, its highest level since July 6. In the
last two days, the VIX is up nearly 40 percent.
"Volatility is a product of the uncertainty that lingers out
there," said Jamie Spiteri, senior dealer at Shaw Stockbroking
in Australia.
"A lot of investment in the market is being pulled back
because of the uncertainty attached to something that hasn't
really got any recent or significant precedent."
Worries about Japan and a spate of weak U.S. housing data
sent key Wall Street stock indexes down 2 percent overnight,
with the S&P falling into negative territory for the
year. .
Copper edged down on the Shanghai and London
markets and spot gold slipped more than $5 to
$1,394.20 an ounce.
Oil rose, with Brent crude approaching $111 a barrel
as worries over supply disruptions from upheaval in the Middle
East outweighing concerns that the Japan disaster would hit the
global economy and demand for energy.
(Reporting by Hideyuki Sano and Antoni Slodkowski in Tokyo and
Wayne Cole in Sydney; Editing by Kim Coghill and Richard Borsuk)
