In this study, we analyze the energetics of the quasigeostrophic (QG) currents observed in the course of an extensive Soviet field experiment in 1987. The analyzed data span over the period of 1 month and cover the region 37.5¿--42.5¿N, 151.5¿--158¿E at an average horizontal resolution of 35 km. The processed data set includes the results of measurements at 668 hydrographic stations, 118 moorings, Geosat sea surface height anomalies, ECMWF winds, and ETOP05 bottom topography. A variational data assimilation method is employed to interpolate observations onto a regular space--time grid. An ensemble average over optimized ocean states is utilized to estimate posterior error bars. Assimilation has shown that the observed mesoscale structures are well described by QG dynamics, which can explain 80--85% of the variability in the velocity and density fields. The model-data misfits lie within the observational error bars for all the data types used in assimilation. The standard Laplacian-type parameterization of the small-scale processes was found to be inconsistent with observations, as the least model-data misfits were obtained with zero diffusivity coefficients. Analysis of the interpolated patterns revealed a pronounced mesoscale mixing event, characterized by the development of a warm streamer swirling around the upper cold core of an old anticyclonic Kuroshio Extension eddy. The process was accompanied by a fast northwestward displacement of the eddy and induced detachment of a warm elongated vortex from its eastern rim. Within a week, the vortex penetrated northward into the subarctic zone and eventually split into several smaller-scale eddies. Energy analysis of the optimal solution indicates that baroclinic instability is the likely source of their energy. Computation of energy exchanges between depth-averaged and shear components of the observed currents reveals the vertical energy cascade (barotropization) of the shear flow at a rate of (29 ¿ 4) ¿ 10-7 cm2 s-3 and the weaker kinetic energy transfer of opposite sign due to topographic interaction. Mean currents in the region are baroclinically unstable with an estimate of the available potential energy flux from the mean current to the eddies (53 ¿ 8) ¿ 10-7 cm2 s-3. Potential enstrophy is transferred to mesoscale at a rate of (33 ¿ 7) ¿ 10-19 s-3. These figures can be considered as experimental evidence of the properties of free geostrophic turbulence, which were predicted by theory and observed in numerical experiments.