"This reaction will persist until there is clarity on the Japanese nuclear problem. If there is clarity on the nuclear plants being fixed, then there will be a relief rally but markets will need convincing," he added.
The impact of the earthquake is difficult to quantify at this stage and the Bank of Japan's response will be key, according to Parker.
"In 1995 when the Kobe earthquake hit, the yen strengthened and the equity market fell for many months," he said. "This time, the BoJ will prevent further yen strength which was already causing problems for the economy. The extent to which production falls depends on the nuclear problem and the disruption to power supplies," Parker added.
About 30 percent of Japanese power supply is nuclear and major industries are largely outside the earthquake zone, in the Tokyo, Osaka and Kobe areas, he pointed out.
"At this stage, it is impossible to forecast how the nuclear problem will evolve," Parker said.
"Scenario 1 is that it is contained, then the initial impact on production is negative but then, as reconstruction kicks in, growth should recover in the second half.
The problem is that budget resources are constrained but an emergency budget will clearly be passedand the BoJ will expand QE," he said.
"Scenario 2 is that the nuclear problem becomes more severe, in which case demand and activity will fall for a longer period of time," Parker said.