US intervention to support the yen will do little to help Asia's battered economies, according to the region's analysts.
A desire to see Asia stabilise was cited as the driving force behind the US move.
"All people are asking is for Japan to be a neutral factor," said Mr Guanon Ma, co-head of economic research at Salomon Smith Barney. "Asian economies are heavily wounded and this is a very bad time to add salt to those wounds."
Top financial officials from the Group of Seven nations and Asia held a meeting in Tokyo at the weekend. After the meeting US Deputy Treasury Secretary Mr Lawrence Summers said that the joint USJapan intervention last week, which lifted the yen from around 146 to 135 to the dollar, had created a "window of opportunity", but added that that was unlikely to last. He said concrete action to boost the Japanese economy was "urgently needed". Analysts concurred.
Japan was not going to be a locomotive for Asian growth, but "an oncoming train moving at high speed," said Mr Ma. "Asia is saying, `We don't expect so much money from you, but please, don't add to this liquidity crunch'."
Yesterday Japan's Finance Minister Mr Hikaru Matsunaga vowed to push ahead with economic reforms but offered no detailed policies. This was despite the world's senior finance officials warning Tokyo to act swiftly.
The weak yen has changed Asia's economic structure beyond recognition. For more than a decade, Japan endowed Asia with investment, expertise and industrial capacity, transforming a developing region into a booming economic powerhouse.
Now Japan is officially in recession and Asia is suffering the consequences. Mr Nitin Parekh, regional strategist at Credit Suisse First Boston estimated that $300 billion (£230 million) in Japanese capital has fled the region in the past five years.
Japan supplied much of the foreign direct investment that created present-day Asia. Mr Salomon Smith Barney said in 1997 alone, Japan supplied nearly $2.5 billion (£1.9 billion) in FDI each to China and Indonesia, pumping $10 billion (£7.7 billion) in total into the region.
"A weaker Japanese yen should discourage (Japanese) foreign direct investment . . . to the rest of Asia, which has been a key source of economic growth and financing for many Asian economies," said Mr Ma.
Credit lines have also been cut, preventing Asian exporters from exploiting plentiful industrial capacity and newly competitive cost structures. Imports are dropping, depriving Asia's export machine of necessary inputs.
Those nations that have reported an increase in exports, such as South Korea, are showing gains in volume, not value.
Before the crisis, non-Japan Asia (including Greater China) shipped about 12 per cent of its exports to Japan, which also accounted for at least 20 per cent of the region's imports.
Now Japanese imports from Asia are falling, and the trend of decline is accelerating. Mr Parekh said Japan's intake of Southeast Asian goods fell an annualised 20 percent in the first quarter - and then by 26 per cent in April alone.
At present levels of about 137 to the US dollar, the yen is unlikely to change this outlook. Japanese factories in Asia are slowing down as demand shrinks, and foreign investors are taking longer than expected to snap up Asian bargains and fund the corporate recapitalisation required for recovery.
That situation, however, becomes very much worse if the yen fails to maintain its interventionled gains and sinks again, as expected. Many analysts forecast the yen at 150 by year-end, and some are substantially more bearish.
