Japan's vice-minister of finance for international affairs, Eisuke Sakakibara, said the crisis had been caused primarily by a huge inflow of foreign capital.
"The Asian economy is not in meltdown. What we have seen is a bursting of the bubble, an end of the euphoria," Mr Sakakibara said. He insisted the crisis was caused as much by reckless foreign lending to the region as anything else. "I am an advocate for deregulation and reform in Japan and everywhere, but the Asian crisis is primarily a capital account crisis," he said.
"Lots of people talk about the structural problems of the region now, but they have known about these things, the chaebols (linked conglomerates of industrial interests and banks) in Korea and so on, for years but before this crisis nobody said there was anything wrong with them, rather the reverse."
Separately in the US, Federal Reserve Chairman Alan Greenspan warned Asia's financial crisis could spread to other regions of the world and said large investments were needed to quell the turmoil which bordered on panic.
But Mr Greenspan pinned the blame on Asian policy-makers, saying: "At the root of the problems is poor public policy, that has resulted in misguided investments and very weak financial sectors."
Mr Sakakibara's remarks drew a robust response from Rudi Dornbusch, professor of economics at MIT in the US, who echoed the view of most Western governments in describing the troubles as "not a crisis in global capitalism, but in crony capitalism".
Mr Dornbusch said the root of the problem was "very, very bad government, sleazy government unwilling to tolerate adequate rules of disclosure and independent supervision".
His view was backed by Deryck Maughan, chief executive of Salomon Smith Barney, who said it was clearly not a crisis in global capitalism since nobody was trying to get out of global capital markets, nor was there much volatility in Western markets.