The government's commitment to support Tokyo Electric Power Co. contrasts with investors selling its shares at a record pace and betting on a 59 percent likelihood the utility will default on its debt in five years.

Liquidating Tepco would cause huge problems and must be avoided, Chief Cabinet Secretary Yukio Edano said Monday. The company's shares fell an unprecedented 28 percent to ¥207 on Monday after the head of the Tokyo Stock Exchange said it needs to be restructured. The stock rose 4.35 percent Tuesday, closing at ¥216 after briefly hitting ¥228.

Political bickering over the future of Prime Minister Naoto Kan has cast doubt over whether his administration can implement its plan to ensure that Tepco compensates victims of the Fukushima No. 1 nucler plant crisis. The utility has slumped 90 percent, erasing about ¥3.1 trillion in market value, since the March 11 earthquake and tsunami triggered the world's worst nuclear crisis since Chernobyl 25 years ago.

"Speculation that it's just a matter of time before Tepco goes bankrupt has been dominating the stock market, in stark contrast with the government's efforts to keep it alive," said Yasuhide Yajima, an economist at NLI Research Institute. "The market doesn't trust the government's ability to move ahead with plans to keep Tepco afloat."

Contracts insuring its debt for five years jumped 400 basis points to 1,150 late Monday, or ¥115 million a year to protect ¥1 billion of debt, according to CMA prices in Tokyo. The credit-default swaps showed a likelihood of a default in five years at 59 percent, the highest level on record. Tepco has ¥6.83 trillion in bonds and loans outstanding.

"Claims held by parties dealing with the accident, and especially those held by small and medium-size businesses, must be protected," Edano told reporters. "If a court-led bankruptcy were to occur, it would be a major problem because neither of these two classes of claims would fall under the category of preference claims."

His remarks may give a short-lived boost to the utility's shares, "but in the long run they'll approach zero as the company's fundamentals won't change," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co. "It's a money game as all participants are speculative investors now."

Tepco may post a full-year net loss of about ¥570 billion on a parent basis for this fiscal year, it was reported Monday, citing an internal document from the company. The utility said it wasn't the source of the report. Tepco on May 20 posted a loss of ¥1.25 trillion in the year that ended March 31, the biggest on record for a nonfinancial company in Japan.

TSE President Atsushi Saito said the company needs to be restructured along the same lines as Japan Airlines Co., which filed for bankruptcy protection, the Asahi Shimbun reported Saturday.

Saito's comments echoed those of Shigeaki Koga, an official in the Ministry of Economy Trade and Industry, which oversees the nuclear power industry. Koga said in a 14-page memo on May 11 that Tepco is unable to pay compensation for the nuclear disaster alone and a company that can't meet its financial obligations should file for protection.

The cost of dismantling the Fukushima plant may reach ¥20 trillion, and compensation for households in the 20-km evacuation zone may total ¥630 billion over 10 years, according to the Japan Center for Economic Research.

The Fukushima nuclear station suffered three reactor meltdowns after the earthquake and tsunami knocked out power and backup generators, crippling its cooling systems. The disaster displaced 50,000 households in the evacuation zone because of radiation leakages into the air, soil and sea.

The government said last month it will create an agency to handle claims made against Tepco and will issue bonds to fund them. The utility accepted the conditions set by the government, which include unlimited liability on payments for damages.