By Taiga Uranaka and Ki Joon Kwon
FUKUSHIMA, Japan (Reuters) - A hydrogen explosion rocked the earthquake-stricken nuclear plant in Japan where authorities have been working desperately to avert a meltdown, compounding a nuclear catastrophe caused by Friday's massive quake and tsunami.
The core container was intact, Jiji news agency said, quoting the plant operator, Tokyo Electric Power Co (TEPCO), but the local government warned those still in the 20-km (13-mile) evacuation zone to stay indoors . Seven people, six of them soldiers, were missing in the blast, Jiji said.
A TV station also reported a new tsunami on Monday but it
turned out to be a false alarm.
Japan battled through the weekend to prevent a nuclear catastrophe and to care for the millions without power or water in its worst crisis since World War Two, after the huge earthquake and tsunami that likely killed more than 10,000 people.
Kyodo news agency said 2,000 bodies had been found on Monday on the shores of Miyagi prefecture, which took the brunt of the tsunami.
The government had warned of a possible explosion at the No. 3 reactor because of the buildup of hydrogen in the building housing the reactor. TV images showed smoke rising from the Fukushima facility, 240 km (150 miles) north of Tokyo.
TEPCO had earlier halted injection of sea water into the reactor, resulting in a rise in radiation levels and pressure. The government had warned that an explosion was possible because of the buildup of hydrogen in the building housing the reactor.
A badly wounded nation has seen whole villages and towns wiped off the map by a wall of water, leaving in its wake an international humanitarian effort of epic proportions.
As the country returned to work on Monday, markets began estimating the huge economic cost, with Japanese stocks plunging around 5 percent and the yen falling against the dollar.
Prime Minister Naoto Kan said the situation at the crippled Fukushima nuclear plant remained worrisome and that the authorities were doing their utmost to stop damage from spreading.
"The earthquake, tsunami and the nuclear incident have been the biggest crisis Japan has encountered in the 65 years since the end of World War Two," a grim-faced Kan had told a news conference on Sunday.
"We're under scrutiny on whether we, the Japanese people, can overcome this crisis."
Officials confirmed on Sunday that three nuclear reactors north of Tokyo were at risk of overheating, raising fears of an uncontrolled radiation leak.
Engineers worked desperately to cool the fuel rods in the damaged reactors. If they fail, the containers that house the core could melt, or even explode, releasing radioactive material into the atmosphere.
The world's third-biggest economy also faced rolling power blackouts to conserve energy, and Tokyo commuters reported long delays as train companies cut back services.
DEATH TOLL "ABOVE 10,000"
Broadcaster NHK, quoting a police official, said more than 10,000 people may have been killed as the wall of water triggered by Friday's 8.9-magnitude quake surged across the coastline, reducing whole towns to rubble. It was the biggest to have hit the quake-prone country since it started keeping records 140 years ago.
"I would like to believe that there still are survivors," said Masaru Kudo, a soldier dispatched to Rikuzentakata, a nearly flattened town of 24,500 people in far-northern Iwate prefecture.
Kyodo said 80,000 people had been evacuated from a 20-km (12-mile) radius around the stricken nuclear plant, joining more than 450,000 other evacuees from quake and tsunami-hit areas in the northeast of the main island Honshu.
Almost 2 million households were without power in the freezing north, the government said. There were about 1.4 million without running water.
"I am looking for my parents and my older brother," Yuko Abe, 54, said in tears at an emergency center in Rikuzentakata.
"Seeing the way the area is, I thought that perhaps they did not make it. I also cannot tell my siblings that live away that I am safe, as mobile phones and telephones are not working."
The most urgent crisis centers on the Fukushima Daiichi nuclear complex, where authorities said they had been forced to vent radioactive steam into the air to relieve reactor pressure.
The complex was rocked by a first explosion on Saturday, which blew the roof off a reactor building. The government had said further blasts would not necessarily damage the reactor vessels.
TEPCO said on Monday it had reported a rise in radiation levels at the complex to the government. On Sunday the level had risen slightly above what one is exposed to for a stomach X-ray, the company said.
Authorities had been pouring sea water in two of the reactors at the complex to cool them down.
Nuclear experts said it was probably the first time in the industry's 57-year history that sea water has been used in this way, a sign of how close Japan may be to a major accident.
"Injection of sea water into a core is an extreme measure," Mark Hibbs of the Carnegie Endowment for International Peace. "this is not according to the book."
A Japanese official said 22 people have been confirmed to have suffered radiation contamination and up to 190 may have been exposed. Workers in protective clothing used hand-held scanners to check people arriving at evacuation centers.
"NOT ANOTHER CHERNOBYL"
The nuclear accident, the worst since Chernobyl in Soviet Ukraine in 1986, sparked criticism that authorities were ill-prepared for such a massive quake and the threat that could pose to the country's nuclear power industry.
Prime Minister Kan on Sunday sought to allay radiation fears: "Radiation has been released in the air, but there are no reports that a large amount was released," Jiji news agency quoted him as saying. "This is fundamentally different from the Chernobyl accident."
Kan said food, water and other necessities such as blankets were being delivered by vehicles but because of damage to roads, authorities were considering air and sea transport.
Thousands spent another freezing night huddled in blankets over heaters in emergency shelters along the northeastern coast, a scene of devastation after the quake sent a 10-meter (33-foot) wave surging through towns and cities in the Miyagi region, including its main coastal city of Sendai.
The earthquake has forced many firms to suspend production and shares in some of Japan's biggest companies tumbled on Monday, with Toyota Corp dropping around 7 percent. Shares in Australian-listed uranium miners also dived.
Already saddled with debts twice the size of its $5 trillion economy and threatened with credit downgrades, the government is discussing a temporary tax rise to fund relief work.
Analysts expect the economy to suffer a hit in the short term, then get a boost from reconstruction activity.
"When we talk about natural disasters, we tend to see an initial sharp drop in production ... then you tend to have a V-shaped rebound. But initially everyone underestimates the damage," said Michala Marcussen, head of global economics at Societe Generale.
Ratings agency Moody's said on Sunday the fiscal impact of the earthquake would be temporary and have a limited play on whether it would downgrade Japan's sovereign debt.
Risk modeling company AIR Worldwide said insured losses from the earthquake could reach nearly $35 billion.
The Bank of Japan will debate on Monday whether to ease monetary policy further, sources said. The central bank earlier offered a combined 15 trillion yen ($183 billion) to the banking system earlier in the day to soothe market jitters.
Finance Minister Yoshihiko Noda said authorities were closely watching the yen after the currency initially rallied on expectations of repatriations by insurers and others. The currency later reversed course in volatile trading.
The earthquake was the fifth most powerful to hit the world in the past century. It surpassed the Great Kanto quake of September 1, 1923, which had a magnitude of 7.9 and killed more than 140,000 people in the Tokyo area.
The 1995 Kobe quake killed 6,000 and caused $100 billion in damage, the most expensive natural disaster in history. Economic damage from the 2004 Indian Ocean tsunami was estimated at about $10 billion. (Additional reporting by Risa Maeda and Leika Kihara in Tokyo, Chris Meyers and Kim Kyung-hoon in Sendai, Waltre Brandimarte and Scott DiSavino in New York, Natsuko Waki in London and Fredrik Dahl in Vienna; Writing by Nick Macfie; Editing by John Chalmers)