But as growth and trade slowed, and rising inflation made exports less competitive, their currencies came under attack. Interest rates were forced up and stock and property markets began to crash. That debt was built up to finance a rapidly deteriorating balance of payments position. Importing more than they were exporting, they have been increasingly reliant on short-term capital inflows to finance the deficit. That is greater than its reserves.
Similar problems face the other countries.
With the Japanese banking system itself in deep trouble and in the process of cutting credit lines to these countries, an international rescue operation became necessary. They will almost certainly not be enough. And they come at a price. Recolonising Asia Many Asian countries were opposed to IMF intervention and so, initially, was Japan. In response, the US launched a massive diplomatic effort in November to persuade Japan that all external rescue efforts were to be conducted through the IMF and that the principles of free trade should be adhered to by the Pacific Rim countries.