US Treasury Secretary Robert Rubin said it is "absolutely critical" that Japan takes the steps necessary to shore-up its financial system and generate solid growth in order to help Asia recover from the financial crisis.

"A weak Japan is a source of weakness for the region. A strong Japan would be a source of strength for the region," Rubin said in a speech on the Asian crisis at Georgetown University.

"It is absolutely critical that Japan take the steps necessary to deal with the issues in its financial system, to generate solid growth in domestic demand and to open its markets," he said.

Rubin said all G7 nations must take steps to strengthen their own economies as a way of resolving the Asian crisis.

Europe, where "growth is starting to rebound," must "undertake structural reforms and other policies necessary to strengthen this recovery," so that it can emerge as an engine of global growth, he said.

Rubin said that so far the effects of the Asian crisis on the US economy "are relatively moderate". If the Asian crisis were to spread to other emerging countries outside Asia, then the impact on the US "could be much greater".

But the efforts undertaken by the IMF have succeeded in limiting the contagion after the initial impact, Rubin said.

He did not give an estimate of when the Asian crisis might begin to abate.

"This is a period of considerable uncertainty and challenge for the global financial system," he said.

"While nobody can say for certain what will happen, the countries in Asia have great underlying strengths, such as high savings rates, firm commitments to education and strong work ethics and, with a sustained commitment to the necessary reforms, they are well-positioned to re-establish strong economic growth and sound currencies going forward," he said.

"The US has enormous economic and national security interests in a strong and vibrant Asia.

"Financial instability in Asia is a threat not only to the region, but to economies all over the world, and even ourselves. We cannot ignore these risks. We must act to best protect and promote our interests."

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