In particular, Thailand and the ROK are making good progress on their economic reform programs. This has been reflected in their currencies appreciating this year and in growing investor confidence. But in coming months we will need to watch carefully what I regard as key indicators for the region's recovery. First and foremost amongst these is Japan's economic health. The weekend's Upper House election result and Prime Minister Hashimoto's subsequent resignation demonstrate the seriousness of the economic situation in Japan and the urgency with which Japan's economic problems need to be addressed.
Japanese recovery is central to the fortunes of East Asia.
It is crucial that Japan takes measures to ensure its economy does not slide into deep recession, seeing further devaluation in the yen. Markets certainly welcomed the Japanese Government's recent actions to revitalise its economic reform program. We encourage Japan to continue to accelerate the process of economic reform, which will benefit both Japan and the region, at this time of widespread economic difficulty. An important linked issue is whether China might be forced to devalue the yuan by currency depreciations in the region. The Chinese economy has weathered the East Asian economic crisis reasonably well and growth should continue in 1998.