A powerful 10-metre (33 feet) wall of water was reported in Sendai in northeastern Miyagi prefecture, media reported after a four-metre wave hit the coast earlier.
Helicopter footage showed massive inundation in northern coastal towns, where floods of black water sent shipping containers, cars and debris crashing through towns.
Mud waves were shown racing upstream along the Natori river in Sendai city, blanketing farm fields.
In the capital, where millions evacuated strongly swaying buildings, multiple injuries were reported when the roof of a hall collapsed during a graduation ceremony, police said.
Plumes of smoke rose from at least 10 locations in city, where four million homes suffered power outages. Port areas were flooded, including the carpark of Tokyo Disneyland.
The first quake struck just under 400 kilometres (250 miles) northeast of Tokyo, the US Geological Survey said. It was followed by several aftershocks, one as strong as 7.1.
"We were shaken so strongly for a while that we needed to hold on to something in order not to fall," said an official at the local government of the hardest-hit city of Kurihara in Miyagi prefecture.
"We couldn't escape the building immediately because the tremors continued... City officials are now outside, collecting information on damage," she told AFP by telephone.
Prime Minister Naoto Kan quickly assembled his cabinet after the quake hit, and the government quickly dispatched naval vessels from near Tokyo to the worst-hit northeastern area of Miyagi.
The quake, which hit at 14:46 pm (0546 GMT) and lasted about two minutes, strongly rattled buildings in greater Tokyo, the world's largest urban area and home to some 30 million people.
At least 10 fires were reported in Tokyo, where the subway system stopped, sirens wailed and people streamed out of buildings.
Japan sits on the "Pacific Ring of Fire", which is dotted with volcanoes, and Tokyo is situated in one of its most dangerous areas.
A tsunami warning was issued for Japan, Taiwan, Russia and the Mariana Islands, the Pacific Tsunami Warning Centre said.
"An earthquake of this size has the potential to generate a destructive tsunami that can strike coastlines near the epicentre within minutes and more distant coastlines within hours," the centre said in a statement.
It also put the territories of Guam, the Philippines, the Marshall Islands, Indonesia, Papua New Guinea, Nauru, Micronesia and Hawaii under a lower tsunami watch. Indonesia issued its own tsunami warning.
The quake sent the Nikkei share index plunging at the close while the yen fell sharply against the US dollar.
The mega-city of Tokyo sits on the intersection of three continental plates -- the Eurasian, Pacific and Philippine Sea plates -- which are slowly grinding against each other, building up enormous seismic pressure.
The government's Earthquake Research Committee has warned of a 70 percent chance that a great, magnitude-eight quake will strike within the next 30 years in the Kanto plains, home to Tokyo's vast urban sprawl.
The last time a "Big One" hit Tokyo was in 1923, when the Great Kanto Earthquake claimed more than 140,000 lives, many of them in fires. In 1855, the Ansei Edo quake also devastated the city.
In 1995 Kobe earthquake killed more then 6,400 people.
More than 220,000 people were killed when a 9.1-magnitude quake hit off Indonesia in 2004, unleashing a massive tsunami that devastated coastlines in countries around the Indian Ocean as far away as Africa.
Small quakes are felt every day somewhere in Japan and people take part in regular drills at schools and workplaces to prepare for a calamity.Nuclear power plants and bullet trains are designed to automatically shut down when the earth rumbles and many buildings have been quake-proofed with steel and ferro-concrete at great cost in recent decades.