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Japan Crisis: Hope, Fear and Nuclear Uncertainty

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Financial markets remain fixated on the dramatic events in Japan, where efforts continue to prevent a meltdown of exposed nuclear fuel rods at the Fukushima Daiichi plant.

The Nikkei 225 tumbled 5% at the open in Tokyo amid reports of increased radiation leakage at the plant, concerns about rolling blackouts and additional earthquakes. The index then pared its losses, closing down 1.4%, as radiation levels ultimately fell following a Japanese military helicopter operation to drop water on spent fuel rods, which now pose the greatest threat.

The situation at the Fukushima Daiichi plant is obviously highly complex, extremely dangerous and changing rapidly. (Go to Yahoo News for the latest developments.)

"We believe that radiation levels are extremely high, which could possibly impact the ability to take corrective measures," Gregory Jaczko, chairman of the U.S. Nuclear Regulatory Commission, said Wednesday during Congressional testimony.

Tokyo Electric Power Co, which operates the plant, refuted the claim, but a spokesman for Japan's Nuclear and Industrial Safety Agency was less definitive. "Because we have been unable to go to the scene, we cannot confirm whether there is water left or not in the spent fuel pool at reactor No. 4," he said, The NYT reports.

Those conflicting comments, as well as the U.S. expanding the "no-go" zone for its citizens and military to 50 miles vs. Japan's 12 miles, speak to the difficulty of analyzing the situation in real time, even for government officials and nuclear experts -- much less financial journalists.

Earlier this week, I spoke with William R. Martin, professor of Nuclear Engineering and Radiological Sciences at the University of Michigan. (See: Japan Crisis: Fear of Radiation Exposure Overdone, UM Nuclear Expert Says)

In an email exchange, Martin's initial analysis of the situation was that "it is simply impossible for the Japanese reactors to have an accident such as Chernobyl because the reactors were shut down on Friday (no fission power) whereas Chernobyl was at 20% power (fission power) when it had its accident."

Martin also cited the basic design of the Chernobyl plant and the fact it was used to produce weapons-grade plutonium for bombs as well as electricity as a reason why "comparisons to Chernobyl are not useful and sensationalist."

When we spoke Tuesday afternoon, Prof. Martin said the situation at Fukushima Daiichi plant was more akin to the 1979 Three Mile Island accident than the Russian disaster.

But reports of exposed fuel rods at the Fukushima Daiichi plant pose a new and gathering threat.

"Having exposed fuel open to the atmosphere is still not Chernobyl because there is no fire to incinerate the fuel and propel fission products into the atmosphere -- but a fire would change that," he writes in an email exchange Thursday morning. "This accident is taking so many horrible turns and this latest one is the most ominous in my mind. While I have maintained all along that the actual reactor accidents would not approach a Chernobyl event in severity, this may not be the case for the spent fuel pool."

In a positive sign, Tokyo Electric Power Co, which operates the plant, has reportedly completed connecting a power line to the tsunami-crippled plant. Hopes that the plant's cooling systems can soon be brought back online helped U.S. stocks rebound from Wednesday's thrashing. Further aided by a drop in weekly jobless claims and upbeat reports from FedEx and Qualcomm, the Dow was recently up around 1.5%.

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