Tokyo in mourning

TOKYO -- Once you get off the plane in Tokyo and past customs and immigration, the wreckage is everywhere to be seen -- on television, at least. In the arrivals hall of Narita airport, on a huge flat screen high definition television, I watched scenes of the extraordinary devastation from coastal towns and villages as I waited for my bus ticket. My ordinary little TV screen in Shanghai, where I live, didn't do it justice. The stunning images from NHK, Japan's national broadcaster, of the northeastern coastal towns completely destroyed by the tsunami that devastated them, had everyone's attention. People -- Japanese and foreigners alike -- were quiet, watching.

The traffic into town on Monday, slightly before rush hour, was thin. Just three days after one of the biggest earthquakes in recorded history, a lot of people took to heart the government's admonishment to stay home. Though Tokyo was practically untouched by the magnitude 8.9 earthquake -- a function both of its distance from the epicenter and the fact that it's perhaps the most earthquake proof place in the world -- it's a city in mourning. And just three days after the fact, that's as it should be.

There are very few people in this country who are unaware that their fate is, to a greater degree than most others, tied to geology. In 1995 the earthquake in Kobe killed 6000 people, and it cost Japan about $100 billion to rebuild. I lived here then, and I don't remember anyone I interviewed who thought, well that's it, this will be the last one.

Quite the contrary. The Great Kanto quake of 1923 killed about 130,000 people in Tokyo. The Kobe quake, 6000. The geology since then hasn't changed; but Japan, as you'd expect, got much better at dealing with earthquakes, because everyone here knows damn well that they're coming. There was any number of instances, when I lived here, that I thought the "Big One" had come. I would dive under a desk, or jump up from bed and start to run outside, only to learn that what I thought was a "Big One'' was relatively minor in Tokyo.

How many have been killed in this quake and the tsunami that followed? No one knows yet, but given the size, it's going to be a LOT more than 6000. This will make the Kobe quake look like a blip on the Richter scale -- or pretty much any other scale. A Japanese friend I spoke to tonight knows that. The "official'' death toll now -- roughly 1800 -- is "a joke. Everyone knows this. It's going to be 10,000, or 20,000 or more. Who knows at this point?"

That its geology comes at a huge cost to Japan is obvious. It pays in blood and in treasure. The damage from this catastrophe will well exceed the $100 billion it cost to rebuild after Kobe. And Japan today is in far worse shape to cope with it. Its national debt already is roughly 200% of GDP -- second only to Zimbabwe, according to the CIA factbook. Prime Minster Naoto Kan -- his party weakened by scandal -- had been pushing for cuts in spending in order to try to avoid the fiscal abyss. But now his world has been upended. The Japanese government is going to spend huge sums on reconstruction -- it has no choice -- and whatever budget cuts that may come will be trivial by comparison.

I was going to say that what comes next is that Japanese central bank chief Masaaki Shirakawa will put on his Ben Bernanke mask, as if it were Halloween, and do his best "QE" (quantitative easing) imitation. But that already happened. Today. Shirakawa did his Bernanke imitation, because he had to: the Bank of Japan pumped 15 trillion yen ($183 billion) into money markets to assure financial stability amid a plunge in stocks and surge in credit risk. The BOJ chief told reporters today that cash injections will "continue as needed."

Markets around the world are already "discounting" the economic impact of the Great Tohoku earthquake, as they will continue to as the extent of the damage unfolds. In a Tokyo restaurant usually packed with bankers and traders, I had a quick, quiet dinner this evening with a guy I've known for a long time; a "quant'' who used to work for Morgan Stanley (MS, Fortune 500), and is now with a hedge fund. His wife's family is from Sendai, where the damage from the quake and tsunami are most pronounced. After two days of not hearing anything, they heard this morning that his sister-in-law and mother-in-law had both survived.

"Wouldn't have bet on that yesterday," he said. He knows his professional life will soon enough be about figuring out how best to trade a strengthening Yen and a weakening stock market. But not yet, he said. "Not tonight. Not for awhile."