Fundamentally, there has been little change. The yen-dollar exchange rate remains one of the riskiest calls around. Analysts such as Jim O'Neill, chief currency economist at Goldman Sachs in London, see the yen strengthening further. Given the uncertainty, many traders aren't taking big positions. We trade as if the yen will stay strong but we're not sure that's rational.
China can also be destabilizing for the region.
Deflationary forces are still more powerful in China than anywhere else in Asia. Exports and direct investment flows also weakened substantially in the second half of the year. Analysts worry that with little foreign capital coming in, the government's fiscal spending machine won't be powerful enough to generate the growth that the country desperately needs to keep people at work. The government still faces huge problems in both its banking sector and state-owned enterprises. When recovery comes, it will come more to Hong Kong, Taiwan, South Korea and China than to Southeast Asia.