* Nikkei futures drop nearly 5%, exchanges still open
* Yen dips and JGBs surge; extent of damage unclear
* Magnitude 8.9 quake hits near end of Tokyo trading day
By Hideyuki Sano
TOKYO, March 11 Japanese stock futures plunged nearly 5 percent and the yen dipped on Friday after Japan was hit by a 8.9 magnitude earthquake that violently shook buildings in Tokyo and triggered a 10-metre tsunami.
The earthquake, which the U.S. Geological survey graded 8.9, took place shortly before regular trading on the Tokyo Stock Exchange ended, disrupting trade at the very end of the day.
While the Tokyo and Osaka exchanges was open as usual for after-hours trading in bond and stock futures, phone lines were down across Tokyo, making it difficult to trade.
Before the quake struck, the Nikkei was down more than 1 percent and JGBs got a boost from the slide in Wall Street shares on Thursday.
"The phone was not working so we couldn't trade. I was lucky enough to have a long position so I didn't have to do anything. But to be honest, I was busy making phone calls to my family and I don't remember when cash bonds stopped trading," said a fund manager at a U.S. asset management firm in Tokyo.
The Bank of Japan vowed to ensure financial market stability and liquidity.
Osaka Nikkei stock index futures dropped 4.7 percent to as low as 9,950, the lowest since December 2010, before last trading at 10,010. The cash Nikkei ended down 1.7 percent at 10,254.
Ten-year Japanese government bond futures edged up 0.16 point to 139.36 in after-hours trade after having surged 0.66 point during the regular session. The 10-year yield fell 3 basis points to 1.270 percent.
"The markets are taking it very badly, but I would wait for a clearer picture to assess how bad it is," said Tim Condon, chief economist for Asia at ING in Singapore.
"It is still too early days to tell whether there will be continued selling in the stock markets. The construction sector might get a big boost out of this."
The yen dropped to session lows near 83.30 to the dollar before recovering back to 82.95, down only slightly from just before the quake
Traders noted that the yen surged after the 1995 Kobe earthquake due to Japanese repatriation of foreign assets.
Nikkei futures traded in Singapore were at 10,005 after having plunged as far as 9,950. (Additional reporting by Saikat Chatterjee in Hong Kong; Writing by Kevin Plumberg)