Apart from the effects that the devaluations are already having on Japanese manufacturers and banks, the crisis is raising important and difficult questions about Japan's role in healing the damage, and its future as a financial leader in a suspicious and historically hostile region.
Japan is uniquely exposed in South-east Asia, and particularly in Thailand, where the crisis began with the baht's forced devaluation on 2 July. Roughly half of Thailand's $80bn of foreign borrowing comes from Japanese banks, who are only just recovering from the collapse of their own property bubble five years ago. Now, with the baht worth 30 per cent less than two months ago, the repayment of the Thai debts is also called into question.
But Japanese companies have also led the way in setting up offshore manufacturing plants in South-east Asia, bringing valuable skills and technology and benefiting from production costs and young and increasingly affluent consumer markets. In Thailand, for instance, half of all direct investment is Japanese. But the crunch on consumer spending forced by the baht's devaluation is already affecting sales, especially of Japanese cars.
Both Toyota and Honda have opened new factories in Thailand in the last 18 months. Last week, the president of Toyota admitted that the baht's devaluation could force sales down by nearly one third. Nissan has closed one of its factories for August, and Japan's biggest life insurer, Nippon Life, quickly sold off half its holdings in Thai securities after the devaluation.
Japan was the largest national donor to the $16bn rescue package organised for Thailand by the International Monetary Fund (IMF), but its $4bn dollar contribution was actually less than expected.
Despite its position as the region's pre-eminent economic power, Japan has failed to address the crisis with the energy shown by the the United States in tackling the collapse of the Mexican peso some three years ago.Reuse content