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The benchmark Nikkei 225 stock index .N225 extended its early slump after Prime Minister Naoto Kan said radiation levels at the plant on the northeast coast had risen and urged people within a 30-km (18 mile) radius of the facility to stay indoors.

One report said "minute" levels of radiation had been detected in Tokyo.

So far this week, $720 billion in market value has been wiped off the Tokyo stock exchange's biggest companies in the wake of a massive earthquake and tsunami which hit the country on Friday, triggering the nuclear crisis.

The dollar soared to just above 82.00 yen on trading platform EBS from near 81.40 before settling back to near 81.65 yen, little changed on the day and not far from a record low of 79.75 struck in 1995.

Asian currencies from the Australian dollar, the New Zealand dollar to the Thai baht, with the Aussie dropping more than 1 percent on the day to a session low at $0.9986.

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

Asian share markets had initially posted modest losses in response to Tokyo's slump, but then turned sharply lower with the benchmark South Korean index .KS11 falling 3 percent. Australian shares .AXJO dropped 2.6 percent and Hong Kong .HSI about 4 percent.

For the latest news on the Japan crisis,

MARKET TURMOIL SPREADS TO OIL AND METALS

Commodity prices also slumped on reports of mounting radiation levels in parts of Japan as investors scrambled out of riskier assets.

Brent crude for April fell $1.87 to $111.80 a barrel at 10:56 p.m. ET after trading as low as $111.49. U.S. crude for April dropped $1.88 to $99.31.

Even gold, a traditional safe-haven investment, was hit.

Spot gold lost $2.50 an ounce to $1,424.15 an ounce by 8:34 p.m. ET, after rising as much as 1 percent on Monday.

Three-month copper on the London Metal Exchange reversed early gains to edge down 0.4 percent at $9,160 a metric tons by 10:59 p.m. ET.

Japanese shares plunged at one point more than 14 percent to two-year lows as more explosions rocked a quake-stricken nuclear plant, triggering a rise in radiation and prompting investors to dump riskier assets across Asia.

The yen surged on Tuesday, though a sudden spike in the dollar triggered market talk of intervention. Finance Minister Yoshihiko Noda declined to comment on whether Tokyo stepped into the market to weaken the yen and traders later played down the sudden rise in the dollar as a result of a one-off trade

A senior government official also told Reuters speculation was behind sharp movements in the currency and stock markets.

"We will continue to monitor the market," Noda told reporters.

The Bank of Japan on Tuesday offered to pump 8 trillion yen ($98 billion) into the banking system, continuing its huge fund injection aimed at easing market jitters in the face escalating nuclear crisis and fears of unprecedented damage from the earthquake.

It follows a record 15 trillion yen the BOJ offered in same-day market operations on Monday.

"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 told a news conference after a cabinet meeting.

Still, he suggested that the government could downgrade its assessment on the economy in the coming month by saying that its next monthly report will focus on analyzing impacts of the quake and nuclear accidents.

Noda said the stock market was falling in response to "temporary factors" and though he was watching market moves closely he expressed optimism that the Japanese economy would continue to improve.

However, markets gripped by fear that the nuclear emergency could escalate, paid little heed to such assurances and Nikkei futures traded in Osaka tumbled more than 16 percent at one point after Japanese Prime Minister Naoto Kan said radiation levels had become high around the damaged nuclear power plant.

"Our basic view is that the Japanese economy was in doldrums late last year but it has been gradually improving... The Bank of Japan and the government are doing utmost to forestall damage to the economy," Noda said.

The government on Monday tapped 30 billion yen from the 200 billion yen in reserves set aside for disaster relief in the budget for the current fiscal year ending in March.

Noda said the government has ample funds to meet near-term costs of quake relief. But he stopped short of saying whether an emergency budget will be compiled and if so, when, stressing that the government first needed to estimate how much spending would be needed to cope with the devastation caused by the triple blow of a massive earthquake, a tsunami and a deepening nuclear crisis.

(Additional reporting by Kaori Kaneko and Tetsushi Kajimoto; Editing by Edmund Klamann and Tomasz Janowski)

A second hydrogen explosion rocked a stricken nuclear power plant in Japan where authorities have been scrambling to avert a meltdown.

Japanese stocks fell 7.5 percent on Monday as investors expected the earthquake to take an economic toll. The drop, on record-high trading volume among the Tokyo Stock Exchange's biggest companies, was compounded by fears about the long-term impact on power supplies after the earthquake damaged a nuclear generator..T

General Electric Co (GE.N) Chief Executive Jeff Immelt on Monday said it was too early to know what impact the nuclear power crisis in Japan would have on the nuclear power industry.

Japanese ports handling as much as 7 percent of the country's industrial output sustained major damage, disrupting global supply chains and causing billions of dollars in losses, industry officials said.

Auto and electronics makers were among the worst hit. Toyota Motor Co (7203.T), which said it would suspend production at all its car plants until at least March 16, reducing output by at least 40,000 vehicles, dropped 8 percent. Shares in Toshiba Corp (6502.T) and Hitachi (6501.T) both sank around 16 percent.

European stocks were down 0.8 percent in morning trade, led lower by shares of insurance and luxury shares such as Swiss Re (RUKN.VX), and LVMH (LVMH.PA), on worries over the sectors' exposure to Japan. .EU

Brent crude touched a two-week low near $111 on Monday, down by nearly $3 on investor pessimism that economic growth will slow after Japan's earthquake and tsunami, while easing unrest in the Middle East threw the focus back onto ample oil supplies.

China faces a tough balance between creating jobs and cooling inflation, Chinese Premier Wen Jiabao said on Monday, denying that his government risks the kind of political upheaval besetting parts of the Middle East.

U.S. stocks closed the week on a high note on Friday, on relief that unrest did not engulf top oil producer Saudi Arabia, calming some investors who worried the market was entering a near-term slide. Stocks snapped back from early-week losses even as other markets were hit hard by the devastating earthquake in Japan. Oil refiners and industrial-related shares led Wall Street higher.

The Dow Jones industrial average .DJI rose 59.79 points, or 0.50 percent, at 12,044.40. The Standard & Poor's 500 Index .SPX climbed 9.17 points, or 0.71 percent, at 1,304.28. The Nasdaq Composite Index .IXIC added 14.59 points, or 0.54 percent, at 2,715.61.

(Reporting by Blaise Robinson; Editing by Erica Billingham)

Markets swooned at the shock of an 8.9 magnitude earthquake and a tsunami that may have killed more than 10,000 and has left millions of people without power, water or homes. The Nikkei average closed 6.18 percent lower on Monday.

At the same time, engineers were battling to prevent a nuclear meltdown at the Fukushima Daiichi complex owned by Tokyo Electric Power Co (TEPCO), where three reactors threatened to overheat in the worst atomic power accident since Chernobyl in 1986.

Investment bank Credit Suisse put economic losses from the quake at no less than $171 billion, although Finance Minister Yoshihiko Noda said it was too early to put together a firm figure to compile a supplementary budget.

Japan's central bank doubled its asset buying scheme to 10 trillion yen ($122 billion) and held interest rates at 0-0.1 percent after it earlier said it would pump a record 15 trillion yen into the banking system, though some economists said it could have done more.

A swathe of high profile Japanese manufacturers, including Sony Corp, Toyota Motor Co and Panasonic have shuttered production lines, with restart efforts hampered by quake aftershocks.

About a fifth of the country's nuclear power generation capacity has been shut down by the disaster. Thermal plants also shut down, forcing the world's third-biggest economy to instigate rolling blackouts to conserve energy.

"The tremors will likely continue for one to two months, experts say, and are continuing now, so there's an immense amount of uncertainty and unclear points." said Masayuki Kubota, a senior fund manager at Daiwa SB Investments.

Economists said that the triple blow of quake, tsunami and nuclear accident is set to damage the already struggling economy harder and longer that initially expected.

Analysts have grown increasingly cautious about forecasting a quick economic rebound similar to that after the Kobe earthquake in 1995, thanks in part to Japan's indebtedness which at twice the size of gross domestic product means the government has less room for maneuver.

Some say a recession is possible.

"Power supply is a critical factor," said Michala Marcussen, head of global economics at Societe Generale. "If power production output is damaged in a sustainable fashion, that could have a durable impact on the economy.

MONUMENTAL TASK

TEPCO, the biggest power company in Japan, said on Sunday rolling blackouts would affect 3 million customers, including large factories and buildings from Monday onwards. It aims to end the blackouts by the end of April.

Policymakers face a monumental task reviving the economy, not only because of the scale of the disaster but because of their limited options.