Japanese leaders tried to calm panicky financial markets yesterday as a deepening nuclear power crisis looked certain to increase the toll on an economy already convulsing from a massive earthquake and tsunami.

Tokyo’s stock market plunged more than 14 percent at one point after the stricken Fukushima nuclear power plant was hit by two explosions and a grim-faced Prime Minister Naoto Kan warned the nation that radioactivity levels had become “significantly” higher.

Even before yesterday’s dramatic events, economists had estimated that recovery and reconstruction costs would reach at least $180 billion, or 3 percent of the economic output of the world’s third-biggest economy. Others suggested the cost could amount to 5 percent of output.

In the face of the country’s biggest crisis since World War II, Japanese leaders urged calm as the stock market fell.

“Japan’s production and the economic power have not fallen. I think the market confusion will calm down in a short time,” Economics Minister Kaoru Yosano said at a press conference.

$600B wiped from market

The Nikkei closed down 10.5 percent, its biggest percentage fall since October 2008 during the height of the financial crisis. More than $600 billion in market value has been wiped out since Friday.

At yesterday’s lows, the market was down a fifth since Friday.

“All focus is on the nuclear crisis. In the situation where the crisis appears to be worsening, foreign investors, domestic fund operators are pulling out from Japanese shares,” Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo, said.

Federal Reserve to hold steady

WASHINGTON – The Federal Reserve looked set to maintain its ultra-loose monetary policy yesterday as lofty oil prices and swooning stock markets after Japan’s ravaging earthquake raised doubts about the economy’s path.

The worst earthquake on record for the world’s third- largest economy could have substantial ripple effects on the global recovery — evidenced by a pullback in global equity prices, with Japanese stocks falling.

But with the full impact unclear, economists say the best thing for Fed officials to do at the moment may be nothing at all.