First, consider the nature of this terrible shock. In addition to the large wealth destruction and the worrisome health risks of released radioactive material, the spiraling crisis at the Fukushima nuclear reactors raises difficult questions about how and when electricity will be fully restored throughout the country. It will also fuel a global debate about the future of nuclear power, an important source of energy.
Second, think about the funding of Japan's reconstruction program. The mix, particularly involving debt financing and the repatriation of Japanese savings invested outside the country, will matter quite a bit in terms of the impact on different asset classes. As the Federal Reserve knows well, changes in asset valuations can influence consumer behavior and market volatility.
Third, the Japanese disasters are not happening in isolation. They add to the supply shock that the global economy already faces due to the uprisings in the Middle East and the related increase in oil prices. As such, the risk of a global macro tipping point cannot, and should not, be ignored.
No words can come close to capturing the enormity of the human suffering going on today in Japan. Like many others, my heart goes out to all Japanese, and I still struggle to comprehend the extent of the human devastation, let alone predict its implications for policy making in other countries.
I hope that this is what drove the FOMC's decision to exclude any reference to Japan in its statement. The alternative of assuming that that U.S. policy should simply "look through" the tragedy would be a mistake.
(Mohamed A. El-Erian is Pimco's chief executive officer and co-chief investment officer, and the author of the book "When Markets Collide." The opinions expressed are his own.)