Recession is making Japanese shoppers spend less and save more, creating a deflationary spiral that's been driving the Yen lower.

Economist Dr Ken Kurtis says this is the "last chance" for Japan

A nation once obsessed with gadgets and consumerism is simply not buying any more.

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.

Japan dominates

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.

A flood of cheap Chinese exports would cause economic turmoil in the West

If the Yen keeps falling, China, whose spectacular economic growth is built on cheap exports, could be forced to join in.

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.

Noriko Hama of the Mitsubishi Research Institute says Japan's crisis could lead to competitve devaluations

Noriko Hama, of the Mitsubishi Research Institute, says this could trigger a competitive series of devaluation - of what she calls "currency wars".

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.

Summers: Japan must move quickly

Saturday's meetings in Tokyo of top finance officials from around the world illustrated the gravity which the international community attaches to Japan's economic problems.

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.

Billions spent

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.

President Clinton: major policy reversal

President Clinton authorised what amounted to a major policy switch to confront a crisis that's now threatening to wash up on American shores.

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 says Japan is vital to Asian and US prosperity

The US is concerned that if the yen continues to slide, a flood of cheap exports from Japan, the world's second biggest economy, may cost jobs and close factories around the world.