Japan&#39;s Nikkei stock index plunges 13% on nuclear fears [Updated]

Panic selling looked like it was spreading across Asian financial markets on Tuesday after Japan warned of rising meltdown risk at the crippled Fukushima nuclear reactor complex.

The Japanese stock market?s Nikkei-225 share index was down a stunning 1,275 points, or 13.3%, to 8,344 at about 9 p.m. PDT, with about two hours to go in the trading session.

[Updated at 11 p.m PDT: The Nikkei rebounded modestly in the final 90 minutes to close down 1,015 points, or 10.6%, at 8,605 -- the biggest one-day drop since it plunged 11.4% on Oct. 16, 2008, amid the U.S. financial-system rout.]

The index had tumbled 6.2% on Monday, which was many investors? first chance to react to Friday?s devastating earthquake and tsunami.

The Nikkei now has lost nearly 21% from its recent high of 10,857 on Feb. 21.

Stocks were diving across Asia. The Shanghai market index was off 2.1%, Singapore slid 2.8% and Taiwan tumbled 4.5%.

Go here for updates on stock market indexes in Japan and across Asia.

The Bank of Japan on Monday poured a record $183 billion into the financial system in an attempt to forestall investor panic and keep credit flowing in the economy. But some analysts on Tuesday said the bank was too timid and should further boost its program of buying government bonds, corporate bonds and other assets to support markets.

Seeking relative safety, some investors were pouring into U.S. Treasury bonds, driving interest rates sharply lower. The five-year T-note yield sank to a three-month low of 1.82% in Asian trading from 1.98% on Monday.

U.S. stocks fell only modestly on Monday despite the worsening crisis in Japan. The Dow Jones industrial average eased 51.24 points, or 0.4%, to 11,993.16. But without a huge turnaround in Japanese stocks before the end of trading Tuesday, it's likely to be very difficult for Wall Street to ignore the epidemic of selling that is ravaging Asian markets.

-- Tom Petruno

Photo: Satellite image from DigitalGlobe showing the damaged Fukushima Dai-ichi nuclear facility. Credit: Associated Press