Sunday, June 21, 1998 Published at 18:19 GMT 19:19 UK
Business: The Economy
World watches for Japanese recovery
Tokyo workers look for signs of economic recovery
Japan's economy is in a perilous state, prompting fears that the whole world could be dragged into the economic crisis that has overtaken South-East Asia.
Recession is making Japanese shoppers spend less and save more, creating a deflationary spiral that's been driving the Yen lower.
Dr Ken Kurtis, an economist who attended meetings of top financial officials in Tokyo at the weekend, says that this is the last chance for Japan to put its house in order.
The region is dominated by Japan, the world's second-largest economy which must take the lead in any recovery. In three years, the Yen has fallen by more than 40%.
The crisis has its roots in US$500bn of bad debts held by Japanese banks.
This would risk flooding the west with cheap goods, threatening western companies and banks with bankruptcy and luring the dollar and the pound into the downward spiral.
In South Korea, trade unions are already protesting at soaring unemployment.
South Korea and its neighbours may also be forced to devalue to compete.
At the 1997 Asia Pacific Economic Co-operation (Apec) summit in Vancouver, President Clinton and other regional leaders dismissed South-East Asia's economic trauma as a "glitch".
Now, in a major policy reversal, that glitch has been recognised as an international economic emergency.
US Deputy Treasury Secretary, Lawrence Summers, said it was important Japan took the "window of opportunity" that the meetings offered to quickly implement plans to improve its economic prospects.
On Wednesday, share values across the world's markets soared as word spread that billions of dollars were being spent in an unprecedented attempt to prop up the Yen and defuse the emergency threatening to engulf the Japanese economy.
He said Japan is vital to US efforts at supporting an economic recovery and stability in Asia, which would support America's continuing prosperity.
President Clinton said Japan had promised aggressive reforms to get its economy going and America would support them. He said the US and Japan agreed to intervene jointly again if necessary.
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