Japan's Nikkei average fell on Tuesday, hurt by growing worries about the crippled nuclear plant and the impact of the earthquake and tsunami on corporate earnings, with plant operator Tokyo Electric Power untraded on a report it may be nationalized.
The Nikkei's fall was exaggerated by around 83 points, according to estimates by market players, as it came under more selling pressure after the date passed for investors to receive dividends for the current business year ending March 31.
Shares of Tokyo Electric were untraded on a glut of sell orders after the Yomiuri newspaper said the government would temporarily nationalize it and help pay compensation for damage caused by its Fukushima nuclear plant.
"The situation in Fukushima has a big, underlying impact on the market, with worries over the plant likely impacting Wall Street yesterday," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
Plutonium found in soil at the Fukushima complex heightened alarm on Tuesday over Japan's protracted battle to contain the world's worst nuclear crisis in 25 years.
"As long as there are concerns that TEPCO may be nationalized, investors don't want to hold the stock. Passive funds are selling too," Nakajima said, adding that investors were reminded of panic selling of Japan Airlines shares last year when it decided to decrease capital.
By the midday break the benchmark Nikkei was down 1.5 percent or 139.55 points at 9,338.98. The broader Topix lost 2.1 percent to 839.46.
Japanese shares have lost 10.5 percent since the earthquake, tsunami and threat of a nuclear disaster triggered the biggest two-day rout on the market since 1987. In comparison, MSCI's index of Asian shares outside Japan .MIAPJ0000PUS has gained 2.5 percent since the quake.
The head of Tokyo Stock Exchange said on Monday that some Japanese companies, mainly manufacturers, will likely be late in announcing full-year earnings for this business year because of the earthquake and tsunami, which in turn would delay the payment of dividends.
Mizuho Financial Group plunged 7.4 percent to 138 yen in heavy trade after the Financial Services Agency said on Monday it will inspect Mizuho Bank over its recent computer system trouble.
Mizuho was the fourth most actively traded share on the Tokyo stock exchange's first section by turnover .AM.T.
Bucking the negative trend, Nippon Chemi-Con Corp soared 10.7 percent to 382 yen after Macquarie Securities raised its rating to "outperform" from "neutral", saying although its earnings may be hit by production delays due to the earthquake, it may improve from the July-September quarter as the positive outlook for the aluminum capacitor industry remains intact.
Trading volume was back to pre-quake levels with some 1.2 billion shares changing hands on the Tokyo stock exchanges first section. It has come off record highs reached in the week following the quake, when the average daily volume was at 3.4 billion shares.