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A state of emergency has been declared at a nuclear power plant but officials said there were no radiation leaks.
At least 60 people have been killed by the quake, which struck about 400km (250 miles) north-east of Tokyo.
The region has been rocked by a number of powerful aftershocks.
The tremor, measured at 8.9 by the US Geological Survey, hit at 1446 local time (0546 GMT) at a depth of about 24km.
People poured down from their offices and stood in the street staring up.
A large fire seemed to have broken out in one part of the city and, in another place, injured people were being brought out of a station.
The authorities immediately issued a tsunami warning.
In Tokyo, public transport has been suspended, elevators are switched off in many buildings and thousands of people have gathered in squares and around train stations.
Coastal areas in the Philippines, Hawaii and other Pacific islands were evacuated ahead of the tsunami's expected arrival.
New Zealand later downgraded its alert to a marine threat, meaning strong and unusual currents were expected.
Wall of water Strong waves hit Japan's Miyagi and Fukushima prefectures, officials said, damaging dozens of coastal communities.
Kyodo news agency said a 10-metre wave (33ft) struck the port of Sendai in Miyagi.
Japan's NHK television showed a massive surge of debris-filled water sweeping away buildings, cars and ships and reaching far inland.
Motorists could be seen trying to speed away from the wall of water.
Farmland around Sendai was submerged and the waves pushed cars across the runway of the city's airport. Fires broke out in the city's centre.
The UN's nuclear agency said four nuclear power plants had shut down safely.
Police and local officials said at least 40 people had been killed in the earthquake and tsunami. It is believed the death toll could rise significantly.
A ship carrying 100 people was swept away, Japanese media reported, quoting police in Miyagi. It is not clear what happened to the ship and its passengers.
In Iwate prefecture, also near the epicentre, an official said it was difficult to gauge the extent of the destruction.
"Roads were badly damaged and cut off as the tsunami washed away debris, cars and many other things," said Hiroshi Sato, a disaster management official in Iwate.
The earthquake also triggered a massive blaze at an oil refinery in Ichihara city in Chiba prefecture near Tokyo, engulfing storage tanks.
There were reports of about 20 people injured in Tokyo after the roof of a hall collapsed on to a graduation ceremony.
Residents and workers in Tokyo rushed out of apartment buildings and office blocks and gathered in parks and open spaces as aftershocks continued to hit.
Many people in Tokyo said they had never felt such a powerful earthquake.
In central Tokyo, Jeffrey Balanag said he was stuck in his office in the Shiodome Sumitomo building because the elevators had stopped working.
"There's no panic but we're almost seasick from the constant rolling of the building," he told the BBC.
Bullet train services to northern Japan were halted and rapid transit in Tokyo was suspended, stranding many workers in the city centre.
Narita airport outside Tokyo was initially closed but later opened for departing flights.
About four million homes in and around Tokyo suffered power outages.
In a televised address, Mr Kan extended his sympathy to the victims of the disaster and said an emergency response headquarters had been set up.
The most powerful earthquake to hit Japan since records began has hit the country's north-east and triggered a devastating tsunami.
Japanese TV showed cars, ships and buildings swept away by a vast wall of water after the 8.9-magnitude quake. A state of emergency has been declared at a nuclear power plant but officials said there were no radiation leaks.
At least 60 people have been killed by the quake, which struck about 400km (250 miles) north-east of Tokyo.
The region has been rocked by a number of powerful aftershocks.
The tremor, measured at 8.9 by the US Geological Survey, hit at 1446 local time (0546 GMT) at a depth of about 24km.
At the scene
When the earthquake hit, buildings in Tokyo swayed. Walking was like crossing the deck of a ship at sea.People poured down from their offices and stood in the street staring up.
A large fire seemed to have broken out in one part of the city and, in another place, injured people were being brought out of a station.
The authorities immediately issued a tsunami warning.
In Tokyo, public transport has been suspended, elevators are switched off in many buildings and thousands of people have gathered in squares and around train stations.
A tsunami warning was extended across the Pacific to North and South America.
The Red Cross in Geneva warned that the tsunami waves could be higher than some Pacific islands, Reuters news agency said. Coastal areas in the Philippines, Hawaii and other Pacific islands were evacuated ahead of the tsunami's expected arrival.
New Zealand later downgraded its alert to a marine threat, meaning strong and unusual currents were expected.
Wall of water Strong waves hit Japan's Miyagi and Fukushima prefectures, officials said, damaging dozens of coastal communities.
Kyodo news agency said a 10-metre wave (33ft) struck the port of Sendai in Miyagi.
Japan's NHK television showed a massive surge of debris-filled water sweeping away buildings, cars and ships and reaching far inland.
Motorists could be seen trying to speed away from the wall of water.
Farmland around Sendai was submerged and the waves pushed cars across the runway of the city's airport. Fires broke out in the city's centre.
Continue reading the main story
26 Dec 2004, Sumatra, Indonesia: 9.1 quake and tsunami kills 227,898 across Pacific region
12 Jan 2010, Haiti: 222,570 killed, 7.0
12 May 2008, Sichuan, China: 87,587 killed, 7.9
8 Oct 2005, Pakistan: 80,361 killed, 7.6
31 May 1970 Chimbote, Peru: 70,000 killed, 7.9
20 June 1990, Manjil, Iran: 40,000 killed, 7.4
26 Dec 2003, Bam, Iran: 31,000 killed, 6.6
26 Jan 2001, Gujarat, India: 20,023 killed, 7.7
17 Aug 1999, Izmit, Turkey: 17,118 killed, 7.6
30 Sep 1993 Latur, India: 9,748 killed, 6.2
16 Jan 1995, Kobe, Japan: 5,530 dead, 6.9
Source: USGS
Deadliest earthquakes
27 July 1976, Tangshan, China: est 655,000 killed, 7.526 Dec 2004, Sumatra, Indonesia: 9.1 quake and tsunami kills 227,898 across Pacific region
12 Jan 2010, Haiti: 222,570 killed, 7.0
12 May 2008, Sichuan, China: 87,587 killed, 7.9
8 Oct 2005, Pakistan: 80,361 killed, 7.6
31 May 1970 Chimbote, Peru: 70,000 killed, 7.9
20 June 1990, Manjil, Iran: 40,000 killed, 7.4
26 Dec 2003, Bam, Iran: 31,000 killed, 6.6
26 Jan 2001, Gujarat, India: 20,023 killed, 7.7
17 Aug 1999, Izmit, Turkey: 17,118 killed, 7.6
30 Sep 1993 Latur, India: 9,748 killed, 6.2
16 Jan 1995, Kobe, Japan: 5,530 dead, 6.9
Source: USGS
A state of emergency was declared at the Fukushima power plant after the cooling system failed in one of its reactors when it shut down automatically because of the earthquake.
The local government urged 2,000 nearby residents to evacuate the area as a precaution. Prime Minister Naoto Kan said no radiation leaks at that power plant or any of the other reactors in the quake-hit zone had been detected.The UN's nuclear agency said four nuclear power plants had shut down safely.
Police and local officials said at least 40 people had been killed in the earthquake and tsunami. It is believed the death toll could rise significantly.
A ship carrying 100 people was swept away, Japanese media reported, quoting police in Miyagi. It is not clear what happened to the ship and its passengers.
In Iwate prefecture, also near the epicentre, an official said it was difficult to gauge the extent of the destruction.
"Roads were badly damaged and cut off as the tsunami washed away debris, cars and many other things," said Hiroshi Sato, a disaster management official in Iwate.
The earthquake also triggered a massive blaze at an oil refinery in Ichihara city in Chiba prefecture near Tokyo, engulfing storage tanks.
There were reports of about 20 people injured in Tokyo after the roof of a hall collapsed on to a graduation ceremony.
Residents and workers in Tokyo rushed out of apartment buildings and office blocks and gathered in parks and open spaces as aftershocks continued to hit.
In central Tokyo, Jeffrey Balanag said he was stuck in his office in the Shiodome Sumitomo building because the elevators had stopped working.
"There's no panic but we're almost seasick from the constant rolling of the building," he told the BBC.
Bullet train services to northern Japan were halted and rapid transit in Tokyo was suspended, stranding many workers in the city centre.
Narita airport outside Tokyo was initially closed but later opened for departing flights.
About four million homes in and around Tokyo suffered power outages.
In a televised address, Mr Kan extended his sympathy to the victims of the disaster and said an emergency response headquarters had been set up.
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