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QUEST MEANS BUSINESS

U.S. Stocks Fall; Airlines Called in to Help Cope With Exodus From Japan

Aired March 16, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, HOST, QUEST MEANS BUSINESS: Uncertainty grips the markets as U.S. stocks fall for a third day.

Flight to safety: Airlines are called in to help cope with an exodus out of Japan.

And keeping the lights on after a nuclear scare: We look at the future of global energy supplies.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello to you.

Tokyo is emptying tonight as the mounting nuclear crisis becomes much too much to bear for some. Quietly, calming many thousands of people are deserting the city. The orderly mass exodus is taking place in the shadow of the worsening emergency at the Fukushima power plant. This video was taken earlier on Wednesday. And when a pall of white smoke or steam hung over the site officials say it may have been caused by a breach in the containment vessel which surrounds one of the nuclear reactors. Very worrying, potentially.

A fresh fire broke out at the plant early on Wednesday. You are looking at reactor No. 4 here. You can see just how much damage has been done by the fires and explosions of the past few days. As if these pictures weren't bad enough, another sign of the gravity of the situation came when Emperor Akihito appeared on Japanese TV, a very rare appearance. He said the disaster has broken his heart.

(BEGIN VIDEO CLIP)

EMPEROR AKIHITO, JAPAN (through translator): I am deeply concerned that the current nuclear plant situation is critical. I truly hope that with so many people working together to help this situation will not worsen.

(END VIDEO CLIP)

FOSTER: Well, this helicopter is carrying out a drill above Fukushima. But so far there has been no help from the air. Hope rests with 180 employees of Tokyo Electric Power who remain at the plant. Earlier on Wednesday they were ordered to leave when radiation levels spiked. They are now back at work after the authorities said radiation levels had actually come down.

Let's have a look at the Dow because that is really reflecting a lot of what is going on over there in Japan. And it is falling unsurprisingly. Down nearly 2 percent so quite a sharp fall. It follows Tuesday's global sell off. We'll go live to New York in a moment for the very latest on the dynamics over there.

The head of the International Atomic Energy Agency is on his way Japan, to show the gravity of the situation. We go live now to Tokyo for more on what is likely to be found, when he actually gets there. Soledad O'Brien joins me now.

Soledad, what is your reading of the level of danger right now?

SOLEDAD O'BRIEN, CNN CORRESPONDENT: You know that is an interesting sort of $64,000 question. I think all eyes are focused now on the Daiichi plant, on reactors 3 and 4. And of course as you talked about there appears to have been this breach and you saw the steam above. The affect of that was basically having them call off this planned helicopter water drop, which would have been used to try to put some cooling effort into some of those spent fuel rods. So, because that has been called off they didn't want to fly the choppers into this sort of radioactive mist. Now it seems like the next step is to bring experts in and try to figure out what they can do next.

The big challenge of course is sort of these contradictory statements, as you have been mentioning. The chief cabinet secretary, Edano, talking about how this breach that people could see on live television was unlikely to be severe at the same time, you know you have these warnings and evacuations. And so I think for people who are watching all of this and very concerned and unclear about what exactly to do. The impact, as you can imagine, emotionally for people here, overwhelming. Because they just don't know what to believe. Some of the information is coming out very slowly. Sometimes it is contradictory. I think the fact that the officials from the IAEA are coming in; it will probably start to help to lessen people's fear. At least like they are getting the complete facts and information, because there has been a lot of back and forth about that.

We have word from the U.S. embassy in Tokyo that they are now recommending the evacuation of Americans who are living in a 50-mile radius of those reactors. That is new and that will probably lead to an increase in what we have already seen, which is the number of people who are trying to get out Tokyo, at the airport. Even though people have been saying, listen, outside a certain radius it is fine. It is OK. It is safe. We have seen a huge flow-you have seen those pictures of people who are really just packing up their stuff and trying to get out.

And then also you have the search and rescue continuing on a day that is, again, brutally, bitterly cold for people who are evacuees. It is just a miserable experience. All that going on as they try to deal on many fronts with the evacuees, the nuclear reactor issues, and then of course, trying to calm the fears of a public that doesn't necessarily feel like it is getting the full facts at any one time, Max.

(BEGIN VIDEO CLIP)

FOSTER: OK, Soledad. Thank you very much indeed for that.

Well, those nuclear worries have been a big factor dragging on stocks in the United States for the last few days, of course, we have been reporting on that here. The negative sentiment is continuing during today's session as well, as Alison can explain to us from the New York Stock Exchange.

Alison.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Hi, Max. The U.S. markets are clearly on edge. In just the past few minutes the Dow has been tumbling, actually, now down 227 points. We have even been watching the VIX. That is the fear index here on Wall Street, gauging the sentiment right now. It is surging, the fear index, by 20 percent.

And you know what all it takes is one negative headline out of Japan to rattle investors in the latest sudden drop in the markets comes after comments by the EU's energy commissioner who said that the situation at Japan's nuclear plant is, quote, "out of control". So obviously, it is all about uncertainty these days on Wall Street. Worries about the nuclear situation in Japan are really at the forefront of investor's minds. They really don't know what the overall impact is going to be, from the disaster in Japan.

Of course, the worries, you can say are for what is going to happen to Japanese companies. You think about Toyota, which said today, it would extend its production stoppage in the country for yet another week. We are also watching IBM shares they are being hit hard, now down more than 4 percent, while most computer hardware companies have little exposure to Japan, IBM is actually and exception. Last year it got 11 percent of it's annual revenue from the country. So you throw in the turmoil, heating up in Bahrain, you throw in what is happening in Japan and we even got some downbeat news on the housing front here in the U.S. And, sure, investors are reacting to a real bad news day, Max.

FOSTER: Alison, thank you so much for that.

While investors are deeply worried about events in Japan as Alison just explained. And stocks in Tokyo staged a brave rebound this session. It follows a two-day drop which wiped a total of 16 percent off the Nikkei. The Japanese yen continues to rise sharply against the dollar. It is now close to a 16-year high with around 80 yen to the dollar. It deals another blow to exporters now reeling from the disaster.

European stock markets suffered heavy losses for a second day. Traders are deeply concerned that Japan's troubles could trigger a new economic slow down. And another sign of the distress is that gold is up about $1 at the moment. It is just a few dollars shy $1,400 an ounce, as investors look for a safe place to store their cash.

I spoke to Stephen King, chief economist at HSBC. And I asked him if traders are right to be so concerned?

(BEGIN VIDEO CLIP)

STEPHEN KING, CHIEF ECONOMIST, HSBC: The (UNINTELLIGIBLE) that have been most effect so far only accounts for about 4 percent or so of Japanese GDP, so in that sense it is not such a big story, economically. It is a huge story, of course, for other reasons. But if it were to spread to Tokyo and Yokohama, if for example the nuclear story were to spread and radiation go to Tokyo and Yokohama, the story changes considerably. Because at that stage you are talking about 17, 18 percent of Japanese GDP being affected and that is what Tokyo was responsible for.

And, of course, you are also beginning to see disconnects between what is happening with Japan and what is happening elsewhere in the world because Yokohama is a major port. So all those connections associated with the urban strength of Tokyo, through to other cities elsewhere in the world, also begin to break down. That would be a really major concern if that were to happen at any point.

FOSTER: And in terms of the production process things are produced in Japan which aren't produced in other parts of the world. So we're getting an idea, are we, about those components may affect production of other products around the world as well? So that is an added element?

KING: This is an area of considerable uncertainly in fact, because we have now global production platform, what is produced as an intermediate good in say, Japan, is then assembled into a final good maybe in China, or Taiwan, or somewhere else in Asia. So, if it is a case of the intermediate goods from Japan can't get through to other parts of Asia, it is possible those factories will also be affected, which means there are layoffs somewhere else. So, there are a series of knock on affects, which difficult to predict at this stage, but something to watch out for over the next few months.

FOSTER: As you say, we don't actually know so how nervous are investors about this right now. They hate uncertainty, don't they?

KING: Absolutely. And one of the big difficulties, currently, is when you have uncertainty, one of the ways you can normally deal with it is to offer some kind of policy stimulus. You know, and extra sort of pill, if you like, to try to persuade people to be a bit more confident. In the form of say, interest rate cuts, or maybe in the form of tax cuts or spending increases, or something like that.

FOSTER: They are pumping money into the system, aren't they?

KING: Well, the Japanese are. The problem is partly for the rest of the world, because as many countries after the financial crisis are no longer in the position to offer the kind of policy stimulus we have seen in the past. And if they are not in a position to do so, there is a danger that business and consumer confidence fall faster than might have otherwise have been the case.

FOSTER: OK, the other factor that we need to consider is how all of the reconstruction is going to be paid for. This doesn't just mean an impact for Japanese finances, it is going to have a knock on effect elsewhere, isn't it?

KING: There will be other repatriation of capital from elsewhere in the world. Japan is one of the world's biggest net savers. It invests huge amount of money in the States, Europe, and Asia. And some of that investment that was going abroad will now stay at home. And there are a number of implications that from that; less Japanese investment in other parts of the world. Also, probably a stronger yen, because as the money comes back into Japan, the yen is likely to appreciate a significant degree. That means more expensive Japanese exports, which of course, means prices go up for countries elsewhere in the world.

FOSTER: OK, in terms of the power supplies in Japan is that just a local economic problem or an international one?

KING: At the moment it is just a local economic problem but of course to the extent it shuts down factories and activity in Japan, there will be disconnects with other parts of the world. So, that in itself is a worry. But broader, longer-term concerns it is not so much about Japan specifically, the concern is about whether politically loose their enthusiasm for nuclear power. Switch back to fossil fuels, suddenly an increase in the demand for oil and gas, you have another big oil shock coming your way.

(END VIDEOTAPE)

FOSTER: A gloomy assessment there from Stephen King. Well, time to stay or time to go? We'll tell you about the growing number of people trying to escape from Tokyo whilst watching and waiting from afar.

(COMMERCIAL BREAK)

FOSTER: What is usually a bustling business center is now virtually deserted as Japan's disaster has transformed parts of Tokyo into a ghost town. As you can see there have been official reassurances that radiation levels in the capital pose no threat to health. But a steady stream of people want to leave the capital, with thousands lining up at Narita International, Tokyo's largest airport, to get away.

A growing number of international airlines have been racing to clear the back log of people who want to leave. The French embassy in Tokyo says it has asked Air France to mobilize planes to evacuate French nationals from Japan. China, which has also begun evacuating its citizens says it is very concerned about the safety of its nationals and to accommodate the large number of Chinese evacuees, China's southern Airlines has replaced the Airbus 321 with-on its Tokyo/Shingyang (ph) route with the larger Airbus A300. In the meantime, both Lufthansa and KLM are diverting their planes for Osaka and Nagoya, instead of Tokyo.

And you can see from this map that these cities are much further away from the quake zone than Tokyo. Simon Calder has written several travel books and guides and is a regular commentator on such issues. He joins me with his thoughts on this, right now.

It is understandable, isn't it, that people want to get out?

SIMON CALDER, TRAVEL WRITER: Well, certainly in the past 24 hours, Max. Things have really gained momentum. Before that, for example, the British foreign office was saying well, we recommend against travel to Tokyo and Northeastern Japan, but everywhere else is OK. They are now warning against all travel throughout Japan, which-

FOSTER: Which is completely unreasonable, isn't it?

CALDER: Well, if you look at somewhere like the beautiful sub- tropical island of Okinawa, in the far southwest. That is actually much further from Tokyo than other cities, such as Shanghai in China, and of course, Seoul in South Korea. So a number of people are going to think, well, this is a little overreaction. But the French have already, as you have been reporting, are sending in aircraft to bring people back.

The big European airlines-which are British Airways, Air France, and Lufthansa-have restructured their entire schedules to avoid particularly having to keep their crew, their pilots and cabin crew in Tokyo for extended stays. So, for example, British Airways is running its operation out of Hong Kong. Air France has got a hub in Seoul, which it is using to shuttle flights to and from.

So there is a growing sense of panic, which of course is very bad news for Japan. Very bad news for the future of its tourist industry and I must say the airlines are having a pretty tough time because normally routes into Narita and now into Haneda airports are very, very lucrative for the giant U.S. and European carriers.

FOSTER: OK. And I spoke to someone from Chile recently, from the tourism sector there, who was furious with these sort of blanket bans on countries. Chile, he pointed out, the earthquake only affected one small part of the country and yet people were not traveling to the country at all. We are seeing the same situation happening in Japan. Why do these foreign ministries act so decisively when they should actually just be talking about one area of Japan?

CALDER: I think they are wanting to make sure that they are not held responsible for putting their citizens at risk. If you look at what happened with Egypt, for example, of course we have had a whole series of these incidents through the whole of 2011, so far. And the U.S. was actually repatriating people on the emergency flights. They took over a terminal at Cairo airport. The British, interestingly, having stopped short of that; and they said actually if you are at one of the vacation resorts on the Red Sea, we think you are all right. As it turned out, that was the correct decision. And no tourists came to any harm.

But clearly, panic, as you have been reporting, is growing in Tokyo. There is a sense that, in some sense, the whole of Japan is contaminated, which of course, in actual terms is ridiculous state of affairs. But the sense is that people have to escape. I think to use the word, the very word that you used, this is in the short term going to mean a logistical issue for a lot of countries and a lot of airlines. In the longer term, obviously, it is yet more a bit striking at the Japanese economy and they are, my goodness me, going to need an awful lot of rebuilding of their tourist industry to persuade people to come back to what is, after all, a very beautiful, welcoming and diverse country.

FOSTER: OK, Simon Calder, thank you very much, indeed.

CNN's Kyung Lah sent us this report just recently from Tokyo, where she has been monitoring the nation's growing anxiety.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT (voice over): Winding lines, mothers comforting babies, no seats anywhere at Tokyo's Haneda Airport departure area. Across town at Tokyo's Narita International Airport, thousands waiting to leave the country; this is what an unprecedented mass exodus out of one of the world's most populated cities looks like, driven by concerns about the nuclear emergency in Fukushima, nearly 200 miles away.

The ones able to leave Tokyo quickly, ex-patriots like Matthew Delboe.

(On camera): Are you really worried? Do you really think there is something that is going to happen?

MATTHEW DELBOE, FRENCH CITIZEN: Two days ago I felt like there was virtually no risk. Now I think it is stupid to stay when you can leave.

LAH (voice over): This is an orderly mass departure, remaining calm a mark of Japanese civility even in the face of crisis. And this is a crisis noted in an unprecedented site.

(EMPEROR AKIHITO SPEAKING JAPANESE):

Japan's emperor comforting his country in a nationally televised address. A nation's quiet anxiety evident all over the city, empty grocery store shelves as residents stockpile rations for a possible emergency and empty streets in downtown Tokyo.

(On camera): Normally there are people lining up all down those stairs for that very popular restaurant in this business district. Over here you would normally see people also lining up to get food to carry out. You can see there is no one here. This is highly unusual for the middle of the day on a Wednesday. Walk around over here and this is one of the only ATMs in the area. There is normally people lining up all down this street. But you can see, there is no line today.

"It's scary," says this owner of a noodle shop. And lonely, no customers for restaurants to serve, but he's not leaving. "I have my entire life here," he says. "I can't just pull up and leave."

ZACH OGURA, TOKYO RESIDENT: I think it is, yeah, a bit over worried, yes.

LAH: Tokyo resident Zach Ogura says Tokyo is home and he's not ready to leave with his two sons yet. Emphasis on "yet".

OGURA: At this moment in time, I don't worry.

LAH (on camera): Do you think-

OGURA: But I don't know, you know? Within a few days, or so, that's- I don't know.

LAH (voice over): That uncertainty keeping a country on edge and on the move, away from the brewing threat to the north. Kyung Lah, CNN, Tokyo.

(END VIDEOTAPE)

FOSTER: Anxiety there, uncertainty in the global markets. They are just really struggling to assess what the damage will be from the earthquake. But particularly right now, the nuclear concern, let's have a look at the Dow, over on Wall Street. It has been falling faster and faster in the last hour. It is down now, more than 2 percent, nearly 2.5 percent. Pretty rapid falls over there on Wall Street.

The nuclear emergency in Japan may pose a threat to the entire nuclear industry itself. That is what they are aware of and we will show you the reaction on three continents. Plus, you will hear from the ecology minister at the world's second largest nuclear power producer.

(COMMERCIAL BREAK)

FOSTER: Hundreds of kilometers from the Fukushima nuclear plant in northeastern Japan, no one is taking any chances. People have fled to this shelter in Nigata (ph) to escape any potential radiation. They were turned away from the Fukushima's overcrowded shelter. Radiation levels at the region's damaged Daiichi plant have surged and dropped repeatedly over the past few days. Nerves remained frayed across Japan.

Even in Tokyo which was spared the worst of the disaster, one man tells CNN, quote, "We have got a different kind of damage, lacking in petrol, food, and electricity."

The ongoing uncertainty around Japan's damaged nuclear plant is raising plaintive questions. The future of this entire energy source is under intense scrutiny, right now, and around the world. Countries are reacting in many different ways, as Jim has been taking a look at-Jim.

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Max, let's look at Wednesday's development. And we'll start with growing safety fears in the United States. A company called Progress Energy Florida has halted plans to restart its Crystal River Nuclear Plant. Now that restart had been scheduled for next month, but cracks were found in a concrete outer wall. That plant was shut down since September 2009 for repairs.

Now, closer to Japan, let's look at China. China says it is suspending the approval of new nuclear projects until new safety rules are in place; but no word on when those new safety rules will be agreed. Wednesday's safety was chaired by Premier Wen Jiabao. China, of course, has the largest nuclear expansion program; 25 nuclear plants are currently under construction.

Now we all know France has a lot of nuclear power and it says it remains committed to nuclear energy. But it will run through checkups on all of its plants. Nuclear energy provides around two-thirds of France's power. The country says it is not stopping any of its 58 reactors. And France says lessons will be drawn from Japan's nuclear emergency, Max.

FOSTER: Are the French nervous about this, it seems, than other countries. But you do seem to be seeing a fundamental shift in the way energy is supplied to the world. What do you reckon?

BOULDEN: Yes, over the next couple of months a lot of energy companies are saying that there is going to have to be a fundamental change for a number of reasons. And I've looked at those reasons. Here is that report.

(BEGIN VIDEOTAPE)

BOULDEN (voice over): Countries rely on a finely balanced mix of fuels to produce electricity. Japan is the world's biggest importer of conventional fuels like coal and liquefied natural gas, or LNG, and the world's third largest oil consumer. Up till last week 30 percent of electricity was produced by nuclear. The earthquake and tsunami will change that mix, at least in the short term.

TOM WALLIN, ENERGY INTELLIGENCE: This is a game changer on a number of levels, for nuclear and also secondarily for their gas and for oil, too.

BOULDEN: Energy producers and companies are now having to scramble. Within hours of the earthquake, for instance, prices when higher for LNG in Britain. Shell, for one, says it has already diverting LNG to Japan to make up for the lost nuclear power.

HARRY TCHILINGUIRIAN, BNP PARIBAS: I think the preferred route is going to be more LNG coming to Japan. Now, of course, the implications of Asian LNG being diverted to Japan is that less cargoes will head to Europe. So that could affect prices in Europe.

BOULDEN: But it is not clear that natural gas prices should jump in the medium term, affecting gas bills for consumers around the world.

WALLIN: We have an interesting situation globally with North America importing much less than it had been expected now, because of rising domestic production. And so, therefore, there is some slack in the system. There is already talk about Middle East producers, particularly Qatar, shifting volumes that were destined for the Atlantic Basin, to Japan.

BOULDEN: In a normal market natural gas prices generally move with oil prices. But oil fell shortly after the quake, since Japan will need less oil in the near term as factories are shut, refineries are damaged.

And what about coal? Could it now see a renaissance? Emerging countries like China produce and use coal so does the United States. Would Japan now become an even bigger coal importer? Coal prices are expected to rise even before it's clear.

HAYDEN ATKINS, MACQUARIE SECURITIES: It can take somewhere around three to five years to build a coal fired power plant. I think in countries like Japan, where they you now they have to think about a change in the generation mix, it is not clear where coal is going fit in from that perspective.

BOULDEN: The big question now for long-term supply in prices: Will the West move firmly away from nuclear? Roughly a third of Europe's electricity is generated by nuclear power, much higher, of course, in France. More nuclear was becoming one way countries were planning to cut carbon emissions, instead of burning more coal and using pricy oil to generate electricity. For now, LNG appears to be the fuel of choice. Jim Boulden, CNN, London.

(END VIDEOTAPE)

FOSTER: France's energy future is under particular scrutiny, as Jim was explaining earlier, since it gets so much of its electricity from nuclear plants. But as Jim mentioned, it remains committed to nuclear energy. Our Jim Bittermann spoke to the ecology minister there about the emergency in Japan.

(BEGIN VIDEOTAPE)

NATHALIE KOSCIUSKO-MORIZET, FRENCH ECOLOGY MINISTER: There will be a review on all reactors to make clear, to everybody, on which assumptions, on which hypotheses (ph) they have been designed. For which type of catastrophe, for example, they are designed to resist.

JIM BITTERMANN, CNN INTERNATIONAL CORRESPONDENT (on camera): If you were to ask the Japanese authorities last week if their nuclear plants were safe, they would have said, sure.

KOSCIUSKO-MORIZET: Safety has to be based on which type of catastrophe can be expected for a region. Japan is a region very much exposed to earthquake and tsunami. And from what we know, from what is happening in Japan, their plans were well designed for the earthquakes, what was not sufficient was the protection to tsunamis.

We believe nuclear energy remains a good energy. It has to be done with top safety standards and that is why we are continuously improving our system, including our industrial system.

(END VIDEOTAPE)

FOSTER: Repercussions there from the crisis in Japan. Meanwhile, another crisis of a different sort in Bahrain; witnesses tells security forces have stormed the main hospital there. We are on the ground in Manama. You will hear the very latest on the clashes.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster.

These are the headlines.

The head of the U.N.'s nuclear agency will travel to Japan as soon as possible to assess the crisis at the Fukushima Daiichi nuclear plant. There was a radiation spike there earlier on Wednesday that forced workers to leave. But they returned when levels dropped back down.

Cold weather is making things more difficult for both victims and rescuers in Japan and conditions are expected to worsen. Officials say the death toll has now topped 4,300 and is likely to keep rising. More than 8,600 people are still listed as missing.

Libyan rebels are struggling to hold their position in Ajdabiya, a gateway to their stronghold, Benghazi. Forces loyal to Moammar Gadhafi are repeatedly striking the area with war planes and artillery. Four "New York Times" journalists last seen in Ajdabiya are missing. Libyan government forces tell CNN they have no information about the three men and one woman.

The U.S. president has called the kings of Saudi Arabia and Bahrain, expressing concern over a crackdown on protesters in the Bahraini capital. Hundreds of security forces were deployed to break up demonstrations on Wednesday and at least four people were killed in clashes. Foreign forces are in the country, but it's not clear whether they were involved.

But on the ground in Bahrain for you, CNN producer, Victoria Brown, joins us on the line from Manama. Some dramatic scenes are being shown by the images we've been getting in -- Victoria.

But what's the scene like there now?

VICTORIA BROWN, CNN PRODUCER: Well, Max, as you said, there has been a sense of calm here in Manama since the curfew came into effect. That curfew is going to last 12 hours, until 4:00 a.m. tonight morning.

But over the past hour, I have been hearing sporadic gunfire. This cannot be confirmed, where it's coming from or whether it's live ammunition, but it is taking place within Manama after the curfew.

On the streets itself, everything is calm. Military vehicles have been pulling out of the Pearl Roundabout area, the focal point of the protests. And cleanup crews are even coming down the Sheikh Khalifa Highway. They're moving the makeshift barricades -- Max.

FOSTER: OK, Victoria, we're just looking at the daylight images here. And you see the troops traveling around. You see people wandering around the streets, a level of uncertainty, certainly, from the images that we're seeing.

So how did the situation unfold today?

BROWN: Well, it unfolded quite rapidly. It started in the early hours of this morning. We saw plumes of smoke at the Pearl Roundabout area. Phones were jammed, the Internet was slowed down and we could just see people running toward the Pearl Roundabout.

Then, obviously, after a few hours, there -- the streets quieted down and more multilateral protests in the Pearl Roundabout area.

So events have unfolded quite rapidly and we've had a lot of reports from hospitals about security forces storming the hospitals, these conflicting reports that the Bahraini government is denying -- Max.

FOSTER: OK, Victoria, thank you very much, indeed, for joining us there on the line from Bahrain.

Well, here's a closer look at financial ripple effects from those clashes. Bahrain's stock market was shut today. The central bank was forced to move to a different location after a security crackdown on protesters closed the whole commercial district.

And Fitch Ratings downgraded Bahrain's sovereign debt rating for the second time this month. Bahrain remains on watch for possible further cuts.

Two British banks were shutting their branches in Bahrain as the violence intensified. HSBC closed its four branches in the capital, Manama, while Standard Charter -- Standard Chartered has shut down seven.

HSBC's Stephen King told me about the economic impact of this upheaval.

(BEGIN VIDEOTAPE)

STEPHEN KING, MANAGING DIRECTOR ECONOMICS, HSBC: Bahrain itself is not going to have a huge impact. The -- the bigger uncertainty, really, in -- in the Middle East and North Africa is that people don't know where to draw the line in terms of these political upheavals. And the one thing we've seen from Libya in particular is that when you have these political upheavals affecting major oil producers, oil prices government up.

So the uncertainty is really associated with the fact that when Tunisia happened, people said that Egypt wouldn't happen. When Egypt happened, people said that it wouldn't happen, etc. Etc.

But as an extrapolation of these events, oil prices end up even higher. We're in for another oil shock. Under those circumstances, all bets are off in terms of the recovery. So basically, we've had really big increases in oil prices. In the past, you typically find that a U.S. recession follows a year or so later.

FOSTER: And I wonder what spectators are making of all of this, because they can drive the oil price up pretty rapidly, can't they?

Are you aware of any movements there and any suggestion that the oil price will come up even if it's not based on real economics?

KING: We're still trying to work out the extent that to which speculation is involved in the oil price. But there are some fundamental factors currently which are important.

The first is the nuclear story in Japan. The second is the fact that many of the countries in the emerging world are growing very quickly. Their demand for energy is growing extremely quickly. And the third factor is perhaps some of the lagging effects of so-called quantitative easing, the fact that you've got lots and lots of money being printed, by the Federal Reserve and other central banks has now -- has contributed to the increase in commodity prices in general. It's not just oil that's going up, it's food prices, it's metals prices. All these things are rising at the same time.

FOSTER: How concerned are you that events in Japan, which have huge economic repercussions, and then that on top of the Middle Eastern situation, how worried are you that this uncertainty could knock confidence in the international financial system and just make it run kind of a bit less risky and drive us back into recession?

KING: I'm really quite concerned. One of the -- the big differences with this at the moment is that we've got this very peculiar situation in the Western world -- rising inflationary pressures associated with higher oil prices, not much of a recovery. The problem there is if prices rise and wages don't rise, consumer confidence falls away, business confidence falls away and you suddenly find you've slipped from a very confident position, as we started this year, to something which is a lot less ex -- encouraging later on.

Under those circumstances, I think there is a risk that we go back into some kind of at least stagnation, if not recession.

(END VIDEO TAPE)

FOSTER: Stephen King there.

Well, in Japan, many companies are scrambling to get their people out of harm's way. But a brave few are risking their safety at the crippled Fukushima nuclear plant. Workers trying to bring the damaged Daiichi reactors under control had to be evacuated earlier, but they're actually back on the job now, as we hear from CNN's Anna Coren in Tokyo.

(BEGIN VIDEOTAPE)

ANNA COREN, CNN CORRESPONDENT (voice-over): As smoke rises above the Fukushima Daiichi nuclear power plant, inside is a team of workers desperately trying to stop a potential nuclear disaster.

For days, they've been working tirelessly to prevent a meltdown. And in acting as the country's last defense, they're facing exposure to dangerously high levels of radiation.

ROBERT ALVAREZ, FORMER U.S. ENERGY DEPARTMENT OFFICIAL: Well, I think the workers at this site are involved in a heroic endeavor because there is at least fragmentary evidence that in some places on this site, there are life-threatening doses of radiation.

COREN: Initially, 50 workers stayed after more than 700 employees were evacuated, but the government says the team has now increased to 180.

The power company hasn't released any details on the workers, but a Japan newspaper reports a 59-year-old man is among them. He volunteered for the job. He was only six months away from retiring.

His wife telling him, "Please do your best to give relief to the people."

For the residents who have been evacuated from the immediate area or those who live hundreds of kilometers away, the workers' selfless actions have evoked a great sense of pride.

"I couldn't do it myself," explained Yueno Tatataka (ph). "I think it's a wonderful thing they're doing because they're saving lives."

"I believe in the power of the workers," said Mayomoto Mashahiku (ph). "I just hope they can do their work safely."

(on camera): People here in Tokyo and all across Japan know only too well the sacrifice these men are making. But as the world anxiously waits to see if this situation can be contained, many believe not enough is being done to assist these workers.

JAMES WALSH, INTERNATIONAL SECURITY ANALYST: People have to continue to try to be there, to manage this with the hope of -- of getting One, Two and Three to a point of stability. But they can't do it by themselves. That's why I was saying, the government has to step in. And IAEA, they're -- they're supposed to be protecting all of us here and they are nowhere to be seen.

COREN: The government says it's considering seeking help from the U.S. Military. But in the meantime, it's up to the workers left inside this plant to save a nation from a catastrophe.

Anna Coren, CNN, Tokyo.

(END VIDEO TAPE)

FOSTER: So is the International Atomic Energy Agency doing as much as it can?

Senior international correspondent, Matthew Chance joins us now from Moscow -- Matthew, this is also being led from Tokyo.

But what's the involvement of the international grouping?

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Will, much of the world is looking to the UN's nuclear watchdog, Max, for verified information about what the situation is on the ground. And there's been some criticism of the IAEA, that they've been too hands off in dealing with this crisis.

Within the last hour or so, though, the director general of the IAEA, Yukio Amano, who is himself a Japanese national, has kind of responded to that criticism, saying that he intends personally to travel to Japan, perhaps as early as Thursday, to see for himself the situation on the ground, to talk to Japanese nuclear officials and to assess how best the IAEA can help in delivering assistance to this growing Japanese nuclear crisis.

Take a listen to what he had to say about the nuclear crisis in Japan.

(BEGIN VIDEO CLIP)

YUKIO AMANO, IAEA DIRECTOR GENERAL: The situation at the Fukushima Daiichi nuclear power plant is very serious. Damage to the cores of the three units, Unit One, Units Two and Three has been confirmed, that there are -- there have been no significant changes since yesterday.

The cores remain uncovered by one or two meters. We do not know the exact situation inside the reactor vessels, but the pressure inside remains above atmospheric pressure. This suggests that they remain largely intact.

(END VIDEO CLIP)

CHANCE: Well, there's been a lot of concern expressed, Max, that more nuclear teams assembled by the IAEA haven't been sent to Japan yet to assist with Japanese experts in dealing with this crisis.

In their defense, the IAEA say that they can only respond to requests from member states, in this case Japan. Japan has asked for some specialist teams to be assembled and to sent -- be sent to Japan to help in this -- in this effort to bring the nuclear situation under control.

But for the most part, it's been handling this crisis on its own -- Max.

FOSTER: Yes, and, as you say, some criticism of it.

Why do you think they have been hands-off?

Is it that they have wanted to leave it to the Japanese or that they actually didn't grasp the full extent of this crisis until now?

CHANCE: Well, it's -- it's a good question. I mean, to some extent, I mean, obviously, they're absolutely right when they say they don't have the resources, they don't have the mandate to simply intervene in international nuclear crises like this. They have to be invited in by the member state. In this case, obviously, it would be Japan.

That's the situation they're left with. They then have to assemble teams from various other member states and get them deployed there.

But one of the big criticisms of the IAEA has been that it is mandated to exchange or to facilitate the exchange, in its words, of authoritative, verified information about nuclear crises on the ground. But it's emerged that, actually, the UN doesn't have any actual nuclear experts on the ground, assessing for itself the extent of these nuclear problems. It's been dependent exclusively for its information, it seems, on Japanese nuclear officials, on the various agencies it's been in contact with.

And they have a, you know, a pretty patchy record when it comes to being totally up front and totally honest, at least in the initial stages of this crisis, about the extent of the nuclear problems. And so there's been another source of criticism of the IAEA.

FOSTER: Matthew, thank you very much, indeed, for that.

Now, its nuclear plants are vulnerable to earthquakes. Let's put this into context. Earthquakes can occur anywhere and with little or no warning, as we've learned. But they are more likely to occur along the earth's plate boundaries.

The International Atomic Energy Agency estimates that a full 20 percent of all the world's commercial nuclear power reactors are in areas of significant seismic activity. We'll call them earthquake zones, these shaded areas on this map there.

The dots represent the world's 442 operable power reactors.

Now, this map shows the earth's plate boundaries. So you can see that nuclear power plants from North and South America to the Middle East, Europe and Asia are located near or along the fault lines themselves. Turkey and India plan to build new reactors along these plate boundaries. Lots of governments are probably reassessing plans right now.

Electricity companies in Japan have begun a series of rolling power outages all linked to this, of course.

How will that impact the nation's data centers, though and the multitude of businesses that depend on them?

We'll get some answers on that next.

(COMMERCIAL BREAK)

FOSTER: Well, most Japanese outside the disaster zone do appear to be trying to get back into the routine of every day life, if they can, but they're also having to put up with rolling power outages. Early today, TV Asahi reported the largest scheduled blackout since the earthquake struck on Friday. Ten million households reportedly were affected in Tokyo's Adachi District, including the unfortunate woman who was stuck in a lift in Tokyo.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm still upset. My heart is still racing. I knew the power was scheduled to go out, but I just forgot. This is the first blackout we've ever experienced, so I just hopped on the elevator. I got stuck on the elevator going to my apartment on the fifth floor. I was stuck for about 30 minutes. I was lonely and scared, so I banged on the door and luckily a neighbor heard me.

I would like to get a definite schedule for exactly when the blackouts are going to happen.

(END VIDEO CLIP)

FOSTER: Just one of the nightmares unfolding there as a result of the outages.

Well, these rolling power outages may have a serious impact on Japan's data centers, too, also called server farms. They're facilities used to house computer systems as well as hosting Web sites, cloud computing services. And that's a big worry because Japan accounts for around 10 percent of the worldwide cloud services market.

For more, I am joined by John Lennon, director of the Matterhorn Capital Data Centre.

Thank you for joining us.

JOHN LENNON, DIRECTOR, MATTERHORN CAPITAL DATA CENTRES: A pleasure.

FOSTER: Just explain what happens if a data center isn't prepared for a blackout.

LENNON: Well, data centers essentially require, obviously, a continuous power supply to the building. Without power to supply, if it were to be disconnected for some reason, then they have, obviously, backup generators. Those backup generators, however, have to be fed with a constant feed of fuel and they may, if there is difficulty getting fuel to the actual buildings themselves, then the data centers could actually go down.

FOSTER: So the data in those centers, what happens to that?

How does it become vulnerable if the system is effectively shut down?

LENNON: What will happen for -- for most operating companies, especially financial services businesses, they will have mirrored facilities where they will do a controlled shutdown of the facility and they will then direct all of the data to another facility -- a data center facility, either in a region that's less affected or even possibly in a different country.

FOSTER: And I'm just wondering why it becomes vulnerable.

LENNON: It becomes vulnerable because -- because of the -- because of the need for the constant feed of power. All of these facilities have huge amounts of server facilities, which have to be kept at an optimal temperature. If you remember the power, then...

FOSTER: You lose the data?

LENNON: Correct.

FOSTER: I see.

So in terms of the international impact of that, why are we particularly worried about Japan?

LENNON: Well, obviously, Japan -- and especially Tokyo -- being a major financial hub, they're going to have lots of dependency for the financial institutions for data center backup. And, obviously, they will have worldwide coverage on that. And not only is the power probably something to look at, it's also fiber network, as well.

So especially with what's happened there, fiber networks, internationally, are run on the seabed. So they're going to have to look at redundancy networks should something happen to the fiber.

FOSTER: At the moment, in control, though, because we know when the blackouts are coming.

But if there's a sudden blackout, that's when we start getting real problems?

LENNON: Well, that can be. But again, you're going to be relying on your backup generation at that stage. They will have time -- 24 or 48 hours of fuel will be held on site and they'll be able to do a controlled shutdown.

FOSTER: OK. John Lennon, thank you very much, indeed.

LENNON: Thank you.

FOSTER: Steven Nagata is an I.T. consultant who lives in Tokyo.

And for the past two days, I've spoken to him about the life he's been living in the capital and how it's been impacted by the dramatic events of the past few days.

Today, I asked him about those power outages we've just been talking about.

(BEGIN VIDEOTAPE)

STEVEN NAGATA, I.T. CONSULTANT: There are some issues with the blackouts that have concerned companies, primarily that they're not exactly sure when the blackouts will take place. They don't start exactly on time. And often, very often, they've just been canceled for specific sections of the blackout areas.

And without that information, it's very hard for them to properly shut down their servers and make sure that everything is prepared for such a blackout.

And so it has some companies a little -- a little concerned. I don't think it would be considered a major problem, however.

FOSTER: There you are in Tokyo. As we understand it, lots of people are leaving the city.

Does it feel like a ghost town?

(LAUGHTER)

NAGATA: I -- I'd say that's a -- that's a very big exaggeration. Certainly, a lot -- particularly some families -- I've seen some families and lines at the train station to -- to get on the bullet trains. But I would say no more than you'd see on a -- on a big holiday weekend.

FOSTER: In terms of day to day life for you there in Tokyo, I know you were out meeting friends today.

What did you notice about the impact, for example, of the electricity supply problems?

NAGATA: Well, we're being told that they really need a lot more electricity up north. And there were supposed to be blackouts scheduled for the northeast, where the -- the survivors are right now. And that was canceled due to conservation going on in Tokyo right now.

When I went to the cafe today, the owner had actually removed most of the light bulbs in the lighting fixtures and had placed candles on -- on tables, just to reduce the -- the electricity usage.

FOSTER: You know when things are getting serious in Japan when the emperor makes a public statement. It's very rare, as I understand it.

What did you make of that?

Did that help you in any way?

NAGATA: Yes, I -- I -- can't think of a single example when the emperor has actually made a public address on the television before, like he did today. I think it did a lot of good. I -- I think that a lot of people will -- will listen to his message. And he -- he asked for us to kind of work together, to -- to help each other. He -- he praised the -- the work of the -- of the people working to help the survivors and -- and showed sympathy toward the plight of what was going on in the nation.

(END VIDEO TAPE)

FOSTER: So, life living in Tokyo right now.

We'll keep up with Steven throughout the rest of the week.

We are keeping a close eye, also, on the wind conditions around Japan's Fukushima Daiichi nuclear plant, as well as some freezing conditions for rescuers.

Meteorologist Pedram Javaheri is at the CNN International Weather Center for us -- Pedram.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, Max, the winds have been how long over the past 24 hours. But fortunately, it looks like things are going to begin to calm down here over the next few hours as the storm system that had been parked in place begins to push offshore and move out of the area. But here is the current observation. Minus five right now at the Fukushima City observation. That's right there. There is the power plant right here. And, again, the winds primarily a westerly component. The same thing for Ibaraki a little farther to the south. And that's pushing any potential radiation directly offshore. And that's the good news down at the surface.

Get up upstairs in the upper levels of the atmosphere and you can see the winds there also in a northwest to westerly direction over the next couple of days.

So again, any potential radioactive emission here going to begin to push offshore and remain offshore, at least the next couple of days.

And there is that culprit, the storm system beginning to lose its characteristics as it falls off and falls apart and eventually going to move out of the area. So the wind conditions are going to improve.

But before that, we're going to take a look at this. Up to two centimeters of snowfall out of Sendai. Fukushima comes in with one centimeter of snowfall. And typically in March, they do pick up a fair amount of snow, about, say, 10, 15 centimeters, climatologically speaking, and, again, higher elevations a little farther inland picking up some 18 plus centimeters over the past 24 or so hours.

But the wind, this was the main concern, as we have some 400,000 plus people, of course, living out of the areas of their homes there. You can see winds up to nearly 60 kilometers per hour out of Fukushima. And Ibaraki coming in at 59 kilometers per hour. And to really make the matter worse, of course, you take a look, the officials trying to find anyone they can to help with the rescue operations there, having to dig through some snowfall. At Miyako there, folks trying to salvage whatever is left of their personal belongings as the snow looks like it is going to begin to melt the next couple of days.

There is the forecast. Thursday on into Friday, now the average temperature -- notice that it's nine degrees. It is going to gradually warm up, get up to about 11 degrees. And the overnight temps certainly going to be on the cool side. But again, the winds going to calm down, the moisture going to be cut off here over the next couple of days. And that's the good news as far as the weather forecast is concerned.

But I just want to share with you some of the latest numbers as far as aftershocks are concerned. And look at this now. Tabulating everything since Friday's quake, sitting at just shy of 500 aftershocks. About 200 of those have been between a 4 and a 4.9. Chabad, some 250 of them being between 5 and a 5.9 and get up in the 6 scale, you're talking some 35 quakes equivalent to what they saw, say, in Christchurch, New Zealand, back on the 22nd of February.

How about that?

Thirty-five of those equivalent to a New Zealand like quake they've seen out there. So it shows you the magnitude of the devastation left in place there -- Max.

FOSTER: OK, Pedram.

Thanks a lot for that.

Well, poor weather -- weather conditions in Japan are hampering rescue and recovery teams. It's very cold in some parts.

Brian Todd shows us what one team is up against along Japan's northern coast.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT: We're in the town of Kamaishi, in Northeastern Japan. We got here this afternoon to find this scene here. It pretty much tells the story -- complete devastation in this neighborhood. These teams have to comb through all this rubble. It's very heavily concentrated. And the houses clearly have been displaced, knocked into each other. There's a house that was knocked over and possibly into that other one over there, as these guys try to enter that house. You can see them over there. They're working against every conceivable obstacle over here -- tons of mud, debris all over the place.

You've got downed power lines. And the weather, obviously, has turned very, very bad and risky for these crews.

What are the added complications here of the snow?

CHIEF ROBERT ZOLDOS, U.S. TASK FORCE ONE: Well, there's a lot of complications that are added by the snow. First of all, the slip and fall hazards are obviously there.

TODD: Yes.

ZOLDOS: But the snow adds a -- a different element in that it does hide things. It makes a lot of the ground look identical all the way through and it makes it much harder for rescuers to identify what may be a pit, what may be an edge to a cellar. And so we could easily miss things so our people have to be much more directed on that.

TODD: It's a scene of complete destruction. But it's worth it for these guys to pick through every inch and make their way through the downed power lines, over all the objects, into the spaces, because the stakes are enormous, of course. But there is opportunity. There are voids seemingly everywhere you look. Under this house, spaces where people could be sheltering, waiting for these guys to arrive. Under here, everywhere you look, a possibility for rescue.

These guys have almost no room to operate, as they try to get into this house that's been turned completely on its side. Look at this. They've got to slide through these openings. They have nails around, all kinds of sharp objects. Here's a guy coming out.

What's incredible about these places is even with no sign of life, seemingly nothing to come back to, people keep coming back. There's a couple over there picking their way through this rubble that you can barely walk through, trying to get to their house and maybe find something that they can take back.

Late in the day here, the hope finding someone alive gave way to a desperate reality yet again. A body was found inside this house in one of the crevices. They covered it in a flowered blanket. So this area, like so many others devastated by the tsunami. No survivors found here in the wreckage. So we move on to the next area.

Brian Todd, CNN, Kamaishi, Japan.

(END VIDEO TAPE)

FOSTER: Well, the disaster has prompted a massive outpouring of donations from major companies around the world. Delta Airlines pledging a million dollars in cash to support disaster relief efforts. Starbucks, $1.2 million to the Red Cross. Honda will give $3.7 million in aid; also supplying 1,000 generators to people left without power.

Let's quickly check on the U.S. markets before we go, because they were down quite significantly, largely because of worries about the nuclear problem in Japan and the global impact of that, currently down 1.4 percent. So a bit of a bounce back toward the end of the session.

That is it from us.

I'm Max Foster in London.

Hala Gorani is ahead with more from Japan.

Do stay with us here on CNN.

END