Japan's Finance Ministry as well as a number of ratings agencies reported on Saturday that economic impact of Friday's devastating earthquake that struck the northeast of the country, unleashing a tsunami as high as 10 meters, was as yet unknown, but likely to be severe.

Leading economists have suggested that the catastrophe, which likely claimed the lives of more than 1,000 people and wiped out entire cities in the northeast Pacific coastal region, will significantly contribute to Japan's current economic slump.

Japan is already battling with the world's largest public-debt, standing at around 200 percent of the nations GDP, and the current disaster may spark wider global economic concerns, compounded by a turbulent political scene.

"The question is, given that public finances are in such a weak condition already, is this going to push Japan over the edge?" said a senior economist at Mitsubishi UFJ Securities International.

"If we're talking about less than 5 percent of GDP, then it probably wouldn't be the make or break factor. If we're talking about much more than that, it could be a catalyst for wider concerns," he said.

The closure of at least four oil refineries, one which was set ablaze near Tokyo by the great quake, has battered the supply chain for crude in Asia's second-largest oil-consuming nation and oil prices in New York plunged to their lowest level since March, 1.

Japanese bonds are likely to see high volatility in the coming weeks, noted strategists.

Friday's massive sell off in the yen and the stock markets is likely to be a precursor of what's to follow, they said.

The futures for the Japanese market at the moment are down by about 5 percent and the knock-on effect for global stock markets will be substantial, they added.

Japan's economy contracted 1.3 percent in the fourth quarter of 2010 on an annualized basis and the level of social and economic damage that has been caused by the trembler, will determine the government's ability to avoid a financial crisis.

"The short-term effects from a global perspective will be pockets of inflation, with steel, copper and aluminum prices rising, not to mention gas and oil," said one Tokyo-based market analyst.

"Added to this we have to consider the effect this will have on shipping lanes, with imports and exports being disrupted from major ports, and then there's the rebuilding costs -- Japan for a while at least will be financially hamstrung," he said.