Outlook: How Asia and Mexico differ

The crisis in the Pacific Rim economies and the different, though connected, deflation in Japan, will continue to rumble on as a big story for many moons yet, but it seems plain that we are now through the main watershed and into the white water beneath. Total disaster seems to have been averted, rather in the way it was with Mexico three years ago. The long-term impact of that crisis now seems to have been virtually nil.

Arguably, the Far Eastern turmoil is also a lesser earthquake than the Latin American debt crisis of the early 1980s, which posed a real threat to the world banking system. This one compounds an already bad situation with a number of Japanese banks, but the systemic risk appears limited. All the same, the long-term meaning and impact of this crisis is as yet far from clear. Those who think it will be confined to a "mere" 1 percentage point off world growth next year are probably being unduly complacent. Certainly it is far too early to start dismissing it as "just another Mexico". One important reason for this is that the buoyant US economy helped to rescue Mexico. With Japan in such a mess, there is no such big daddy to pull the Far East out of the doldrums.