Financial markets are spooked at the moment by the weakness in the Japanese economy and the fall of the yen. Despite indications that it would not step in to support the currency, the US administration decided last week to wade into the market and intervene along with the Bank of Japan to support the currency. No doubt President Clinton's trip to China and the Chinese unhappiness with the weakness of the yen had something to do with the decision.

But the question must be asked: Is intervening to support the yen the correct medicine? After all, the Japanese economy could badly do with a devaluation of its currency to boost its exports and while there is a fear that a fall in the yen could put pressure on other Far Eastern currencies, there is no immediate sign of this happening.

The Japanese authorities must also, of course, clean up the mess that is their banking system and implement the budgetary stimulus to give their economy a lift. If they succeed, then the disaster being forecast for the Asian region and the international economy could be averted.

But failure could carry a high price. Whatever about the impact on trade and investment, the immediate danger is that events in Asia will further unsettle international stock markets, many of which look very expensively valued.