ECONOMIC AFTERSHOCK

By Bruce W. Nelan

The aftershocks are not always physical, the damage not always measured in coffins and cracked pillars. Just as the port city of Kobe stirred painfully back to life last week from the quake that killed more than 5,000 people and left 300,000 homeless, a psychological temblor hit the Tokyo exchange. On the blackest trading day in nearly four years, the Tokyo exchange's Nikkei average shed 1,054 points, or 5.6% of value, as investors began to size up the blow Japan had suffered. Among the army of construction crews that moved in to occupy Kobe last week, a Tobishima Corp. supervisor surveyed the ruins and judged, ``This city is going to take 10 years to rebuild.''

No wonder the country as a whole got such a serious jolt. One of Japan's most important industrial and transportation centers had been shattered in the 20 seconds the quake lasted. Aside from the destruction of its port facilities, which served as a gateway for about 10% of Japan's overseas trade, Kobe's trains, its elevated highways and much of its basic utilities lay in ruins.

Preliminary damage estimates ranged from $35 billion to $100 billion or more. Brokers, bankers and businessmen around the world read such estimates as a possible forecast of tough times ahead. But the Japanese economy is so big and resilient that while it might stagger, it could absorb the quake's blow. Trade with the U.S. and other major partners would be slowed, but delays in production could be made up later. As a longer range assessment took hold, the Nikkei leveled off and closed down 3.8% from the week's start.

At the same time, critics last week were still denouncing Prime Minister Tomiichi Murayama's management of the disaster for gross incompetence, lack of preparedness and bureaucratic bungling. His government remained reluctant to take help from the outside. Offers poured in from 60 countries, the U.N. and the European Union, but Japan accepted aid from only 15 of them. Tokyo also turned down most offers of help from the U.S. military based in the country, though the American forces have tons of emergency supplies stockpiled and even offered to accommodate refugees aboard an aircraft carrier. Teams of doctors from the U.S. and France arrived to warnings that they could not practice medicine without Japanese licenses.

Kazutoshi Ito, head of the National Land Agency's disaster division, told journalists that sending soldiers into local governments' jurisdiction would have smacked of ``a return to prewar militarism.'' But the commander of Japanese defense forces in the region, Lieut. General Yusuke Matsushima, brushed tears from his eyes when he apologized in public last week. ``People said, Why didn't you help us sooner?'' he recounted. ``I understand, but it was--the situation.''

If the initial rescue effort was slow to get moving, adding to the human tragedy, the clearance-and-rebuilding campaign was not. Thousands of workers and battalions of heavy equipment streamed into Kobe. The government announced it had begun building 19,000 housing units, though that will fall far short of present needs. Most important, Kobe's residents seemed to be recovering their native determination. ``People seem calmer,'' said Ichizo Kubo, 74, the owner of a building-supply shop. ``They have shared the experience of the quake and seem ready to work together.''

A boomlet of sorts was already visible. Kobe's streets filled with men wearing hard hats and the distinctive uniforms of Japan's leading construction firms. Mammoth earthmovers and jackhammers chipped away at the wreckage of collapsed buildings, while welders fused support bars to cracked and buckled overpasses. Workers were clearing rubble and forging new routes around it. Akio Himeji, an executive of the Yoshida Gumi, a marine- construction company, supervised a pumping operation at the docks to provide emergency water supplies. ``I think,'' he says, ``the next few years will be like the postwar recovery. Our company grew a lot in those years.''

In fact it was rising prices for shares in building firms and their suppliers that helped stabilize the stock exchange. One of the oddities of natural disasters is that rebuilding eventually generates a surge in economic growth, and that is almost certain to occur in Japan, where an economic recovery has just begun. Construction firms and the producers who supply the steel, glass, concrete, telephones and machinery they need can expect to do well. Japanese investors were also encouraged by the government's decision last week to subsidize up to 90% of the cost of repairing or replacing public facilities like schools, roads, railroads and the port.

Stock prices in general, though, could falter again if final damage estimates climb higher. The demand for capital for building projects could push long-term interest rates higher, drain cash out of the stock market and divert large amounts of money from other important enterprises.

Big Japanese corporations in the Hanshin area around Kobe feared at first they had been grievously wounded. The quake halted production at two of Kobe Steel's plants, but one of them went back into operation last week, and the other will be shut down for only a month or so. Toyota and Mazda, expecting no deliveries of parts from the Kobe area, closed several auto plants, then reopened them because supplies arrived.

The largest U.S. operations affected were Procter & Gamble, Hewlett-Packard, Eli Lilly and Caterpillar. Procter & Gamble, which runs a $2 billion business in Japan, will be unable to use its 30-story office tower for several months, and is operating out of nearby Osaka. Lilly's main plant is still working but a new one, due to open this month, will need weeks of repair. Hewlett-Packard's electronics plant went back to work at 60% capacity last week. ``Shoot,'' says Dorwin Larsen, general manager of the Shin Caterpillar Mitsubishi joint venture in Kobe, ``it's not that significant in the big picture, even if we can't make it all up.''

But other companies and investors in the U.S. were worried about how the quake would affect their networks. The main risk is in the near collapse of a major export center and container port. Kobe handled 2.7 million containers a year; it was the hub for 31% of all shipments to and from the U.S. ``A lot of goods that normally flow smoothly,'' says Stephen Roach, co-director of global economics at Morgan Stanley in New York City, ``are going through a major bottleneck. This could have ripple effects.''

Japanese shippers rushed to find alternate routes. Chrysler thought 10,000 engines built for its cars by Mitsubishi were stuck in the quake zone, but they were sent out through Nagoya. Ford Motor Co., which depends on Mazda for some of its manual transmissions, reported that it also had found ways to ship its parts through other Japanese ports.

Most financial analysts believe the quake's economic effects will actually fade reasonably quickly. The Japanese economy as a whole remains solid. ``A natural disaster,'' says Joseph Kennedy, an economist at the Manufacturers' Alliance for Productivity and Innovation in Arlington, Virginia, ``comes one day and is over in a week or a month. The underlying strength of the economy is usually untouched.''

One way to put that in perspective is to look at Germany's experience. Unification with East Germany has cost Bonn about $500 billion since 1990. Japan's 10-year payment to come back from what is now called the Great Hanshin Earthquake may total only one-fifth of Bonn's bill so far. For Japan that kind of effort will be arduous but not beyond the country's capabilities.

--Reported by Edward W. Desmond and Satsuki Oba/Kobe and Sharon E. Epperson/New York

With reporting by EDWARD W. DESMOND AND SATSUKI OBA/KOBE AND SHARON E. EPPERSON/NEW YORK