The Bank of Japan's Tankan survey of large manufacturers, a key indicator of future economic growth or decline, fell to its lowest level since February 1994. The economy is in deflation. That's just another reason for fading hopes that Asia might export its way out of the Crisis. Add to the worries a U.S. slowdown and a fledgling rebound in Europe. Another country investors are watching closely is Malaysia, which imposed currency controls to shelter its economy from speculators.
Officials contend that the policy is working.
But bank watchers wonder whether the banks felt pressured to lend. A further worry is that capital controls, instead of buying time for reform, would reduce pressure to change. The easing of the Crisis may have the same effect across Asia. Such a retreat from reform would only damage confidence and cost the region much-needed foreign investment. In the survey, South Korea and Thailand, widely regarded as having bitten the reform bullet, have leapt to the top five destinations preferred by global investors.