Yet as Japan reeled from the latest bad news, with share, bond and currency markets all tumbling, stock markets in New York and London made fresh gains. The Dow Jones index broke through the 9,000 barrier for the first time in early trading.
Moody's Investor Service revised its outlook for Japanese government bonds from "stable" to "negative", a step which could eventually lead to a downgrade of the government's overall credit rating.
"The change reflects uncertainty about the ability of the authorities to achieve a policy consensus that would help promote a return to economic growth and fiscal balance," the agency said in a statement from its New York headquarters. Another rating agency, Fitch IBCA, later said it was reviewing its ratings of Japanese banks and expected further downgradings.
The announcement - a day after the head of Sony said the economy was on the verge of collapse - nudged the already anxious currency and stock markets into a further round of selling which left the yen at its weakest level against the dollar since April 1992. It recovered slightly from a low of Y135.20 to the dollar after apparent intervention by the Bank of Japan, and hints by the finance minister, Hikaru Matsunaga, that the government would act to stabilise the currency.
The news drove the Nikkei share price index down to 15,517.78, a fall of 185 points or 1.18 per cent, following an early surge.
The message from Asian and European leaders gathered in London for the Asem summit was that there was no need to panic. Ryutaro Hashimoto, Japan's prime minister, admitted: "Various concerns from abroad have been voiced regarding the state of the Japanese economy."
He told the meeting that Japan would take the necessary measures for economic recovery, though he provided no more details of a Y16 trillion (pounds 72bn) stimulus package announced earlier in the month, which has so far failed to restore confidence. "The fundamental strength of the Asian economy runs deep. The current difficulties will be overcome," he said yesterday.
Tony Blair, hosting the conference, said the crisis had been "the most serious shock to the world economy for some decades". Today's communique will say the difficulties are not yet over and the need for vigilance remains.
Asia will remain high on the agenda for the meeting of G8 finance ministers and central bankers in Washington later this month, and at next month's summit of G8 leaders in Birmingham.
In contrast to the gloom in Tokyo, on Wall Street, the Dow Jones index jumped through 9,000, having gained 1,000 points 12.5 per cent in past two months.
The Treasury bond market also soared, gaining a point and a half after news of an unexpected drop of 36,000 in employment last month. This was the first fall for more than two years and followed a recently monthly average increase of 345,000.
Even though economists said the drop was a statistical aberration, and average hourly earnings rose by four cents last month to $12.63, the financial markets concluded that the US was safe from any threat of higher interest rates.
Shares in London also rose, the FTSE 100 index ending 11 points higher at 6,064.2. So far the US and European economies and stock markets have been little affected by the Asian crisis, although the risk of a spillover cannot yet be ruled out.
Keith Edmonds, an analyst at IBJ in London, said it was surprising that New York and London were ignoring the impact of the Asian crisis on prospective corporate earnings. "Liquidity-driven bubbles like these have always burst in the past," he warned.
The Moody's statement surprised analysts. Some regarded it as an over- reaction but most were equally negative.
Michael Hughes, a director of Barings Asset Management, said: "It will take a full economic cycle to get Japan back on the road."
Peter Chambers at HSBC Securities said: "Japan is heading for depression. A massive change of culture is needed."
Michael Harrison, page 25