(Refiles to fix link to Japan markets report)
* Yen surges to record 76.25 per dollar before pulling back
* Nikkei falls 2.1 percent, MSCI Asia ex-Japan off 1.2
percent
* S&P erases gains for the year amid Japan nuclear crisis
* Japanese government bond futures rise
* Shanghai copper down 1 percent, oil lower
By Alex Richardson
SINGAPORE, March 17 (Reuters) - The yen surged to a record
high against the dollar and shares in Japan and elsewhere in
Asia 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 markets, hitting shares and other riskier assets such as
commodities and boosting safe-haven government debt, as
investors struggle to get a fix on the scale of the nuclear
crisis and the size of the economic and human toll it might
deliver.
Operators of the Fukushima Daiichi nuclear complex, 240 km
(150 miles) north of Tokyo, said they would try again on
Thursday to use military helicopters to douse the plant's
overheating reactors.
"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.
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
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 79.20.
"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 2.1 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 3 percent and Toyota 3.6 percent.
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 1.2
percent, with Hong Kong's Hang Seng down 2 percent.
Benchmark 10-year Japanese government bond futures
rose 0.24 point to 139.96, following a surge in U.S. Treasuries
the previous day, in thin, choppy trading.
"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.
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 and 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."
Gold fell more than $8 to $1,391 and oil prices
eased, with Brent crude at $109.53 a barrel and the U.S.
benchmark at $97.59, after rising 2 percent on Wednesday
on fears of disruption to Middle East supplies.
Shanghai copper shed 1 percent and three-month
copper on the London Metal Exchange lost 0.7 percent.
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.
(Reporting by Hideyuki Sano and Antoni Slodkowski in Tokyo and
Wayne Cole in Sydney; Editing by Kim Coghill)
