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                <p>TOKYO (Reuters) – Japan said on Friday its economy was in a severe condition following last month's triple disaster triggered by one of the biggest earthquakes on record, with sentiment in its service sector registering the sharpest fall ever.</p>
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Underlining the ferocity of the damage to the economy from the disaster, in which a nuclear power plant was crippled by the giant tsunami following the March 11 quake, the government also asked major companies to cut electricity use in the peak summer months by up to a quarter.</p>
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The Tokyo Stock Exchange said the power cuts meant it would have to delay plans to extend trading hours.</p>
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"Japan's economy is suddenly in a severe condition due to the effects of the earthquake," the Cabinet Office said after the release of its March survey of workers such as taxi drivers and restaurant staff.</p>
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A strong aftershock on Thursday night -- one of the strongest of more than 400 of magnitude greater than 5.0 since the massive March 11 tremor -- shook the already ravaged northeast, forcing two companies, including Sony Corp, to stop production because of power cuts.</p>
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At least two people were killed after the 7.4 magnitude tremor.</p>
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There was a brief scare when water leaks were found on Friday at the Onagawa nuclear plant in the northeast but Japan's nuclear safety agency said it had not detected any change in radiation levels.</p>
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And a relieved Tokyo Electric Power Co (TEPCO) said the latest quake had not caused any more damage to its wrecked Fukushima nuclear plant, though it did have to briefly evacuate workers because of a tsunami alert that was later withdrawn.</p>
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An encouraging note was sounded by the U.N.'s nuclear watchdog, with one of its officials saying there were signs of progress in stabilizing the Fukushima plant, though the situation remained very serious.</p>
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The International Atomic Energy Agency (IAEA) said it had not detected any change in radiation levels following Thursday night's quake.</p>
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"The situation at the Fukushima Daiichi nuclear power plant remains very serious ... (but) there are early signs of recovery in some functions such as electrical power and instrumentation,"</p>
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the IAEA's head of nuclear safety, Denis Flory, said.</p>
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The agency said radiation in the region around the plant, as measured by gamma dose rates, had peaked in the early days of the crisis, and aside from a rise on March 22, had since fallen to "a level very close to background."</p>
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Japan's neighbors have grown increasingly anxious at the risk of contamination from radiation, with some schools in South Korea closing because of fears of toxic rain. Officials there said the radiation levels in the atmosphere were harmless.</p>
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About 28,000 people are dead or missing after last month's triple disaster of quake, tsunami or nuclear crisis in Japan's northeast.</p>
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DISRUPTS BUSINESS</p>
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It has disrupted business, affected supply chains around the world, and reduced industrial output from Japan, a major exporter.</p>
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The central bank said it expected both output and exports to remain weak because of the impact of the quake.
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"Output will hover at a low level for the time being but then start to increase as supply constraints are mitigated," the Bank of Japan said in its monthly report for April.
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Companies and households will need to cut back significantly on power usage this summer when demand is at its peak, Trade Minister Banri Kaieda said after a cabinet meeting.
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He urged major companies to cut electricity consumption by 25 percent.
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But some ministers at Friday's cabinet meeting did call for an end to a campaign for "self restraint" by ordinary people adopted immediately after the March 11 disaster to cut fuel or electricity use and discourage stockpiling of necessities.
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"Some cabinet ministers said excessive self-restraint could worsen the economy, weakening economic power for reconstruction," Chief Cabinet Secretary Yukio Edano told reporters.
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PREVENTING MORE EXPLOSIONS
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Utility TEPCO said it was continuing to inject nitrogen into one of its Fukushima reactors to prevent a repeat of last month's hydrogen explosions.
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The plant is still far from under control and engineers have been forced to pump in tons of water to cool down reactors, in the process creating radioactive water which has to be stored, though some has already been released into the sea.
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Officials say it could take months to bring the reactors under control and years to clear up the toxic mess left behind.
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The government has already set up a 20-km (12-mile) exclusion zone around the plant, banned fishing along much of the northeast coast and set up evacuation centers for the tens of thousands forced to leave their homes following the crisis.
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($1=85.475 Japanese yen)
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(Additional reporting by Mayumi Negishi, Chisa Fujioka, Yoko Nishikawa and Kiyoshi Takenaka in Tokyo, Sui-lee Wee in Beijing, Jack Kim in Seoul; Writing by Daniel Magnowski and Jonathan Thatcher; Editing by Clarence Fernandez)</p>
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