The Southeast Asian countries of Thailand, Indonesia, Malaysia, the Phillipines, and Singapore have been at the epicenter of the Asian economic crisis. On July 2 last year Thailand floated its baht after months of trying to defend it against market pressure. The baht sank immediately by about a third, followed with surprising speed by similar devaluations by the Philippines, Malaysia, and Indonesia. Even the Singapore dollar soon fell, though considerably less than the other currencies, and pressure on currency values spread to Northeast Asia, eventually to wreak havoc in South Korea by December.
Since the equity and real estate bubble burst in 1990, Japan has abdicated the intellectual leadership of the region. By tinkering with and expanding—rather than junking—the state-capitalist economic model of the postwar period, Japan is offering a "wagons on a circle" example to Asian countries. Even if that strategy were right for Japan (which is doubtful), it is almost certainly not economically optimal for other Asian nations.