Japan markets 'hostage to the next headline

Japan's benchmark Nikkei 225 index rallied some 5% in the first 15 minutes of trade on Wednesday, bouncing off a 10.5% loss in earlier session. Market watchers however warn that the worst may not yet be over given the various challenges Japan faces after the strongest Earthquake ever to hit the country.

"We're hostage to the next headline, said Richard Yetsenga, HSBC's Asia money strategist.

Right now, equity players are watching money players & vice versa. The Bank of Japan, in hard work to shore up confidence in the Japanese economy, has injected gigantic amounts of money in to the process to keep money moving & make it simple for the economy to function.

Tuesdays sell off lead by foreign investors dumping Japanese equities, market watchers say was described as a panic reaction to the escalating crisis in Japan & the fear issues at the Fukashima Daiichi Nuclear Plant could impact human health & extend evacuation.

There is talk the BOJ is prepared to do whatever it takes to stabilize the money indeed, they saw a weakening of the Yen within minutes of the central bank's move & the opening of the Tokyo trading day.

In the first hour of trade on Wednesday the central bank injected another $43.2 billion or 3.5 trillion yen in to the process. That raises the total of same day money Tokyo has injected to support its economy to $325 billion historically seven days.

There is a gigantic relief hard work already taking place but rolling black outs could impact on productivity in the medium term. One note from BNP Paribas notes the rolling blackouts by Tokyo Electric Power (the company that runs the Fukashima Daiichi plant) will affect nine prefectures of the north, including Tokyo. These nine prefectures account for about 40% of Japan's GDP.

Stability is key for investor confidence, analysts say, & the BOJ & government moves are a positive signal. That said, measures of volatility have jumped the VIX, the so-called fear index,jumped 15% in the coursework of Tuesdays trade. That is a sign that there's still plenty of unknowns.

So as the drama unfolds, the potential economic impact of the catastrophe remains unknown.