"Fiscal expansion and the willingness to let interest rates come down regardless of what the dollar/yen is doing are both very important aspects of policy over the coming year," George Magnus, Warburg Dillon Read chief global economist, told Reuters.

"If the dollar does go back up against the yen, some of the countries of the region might have to be prepared to weaken again," said Magnus, who is on a tour of the region.

The yen has surged against the dollar, rising to around 114 from about 147 three months ago, before slipping some in recent weeks, to 122 yen to the dollar on Friday.

The yen's rise in turn boosted regional currencies against the greenback.

"We're not talking about a crunch because the crunch has already happened. But I don't think they shouldn't worry if their currencydrops by five per cent, 10 per cent," said Magnus, who in time expects the yen to move back towards 140 to the dollar.

Fiscal stimulus is vital to kick-starting domestic demand, the key component of sustainable growth. Without it, the export-led recovery many analysts see in Asia will fizzle out as the appetite for absorbing vast quantities of regional exports -- particularly in the United States -- vanishes, Magnus said.

He hopes an accord on fiscal stimulus can be reached at the Asia Pacific Economic Cooperation (Apec) summit meeting in Malaysia over the coming week.

If Asian economies increased budget deficits or adopted some kind of fiscal stimulus equivalent to one per cent of gross domestic product, growth through the region could be as much as three or four per cent over the next 12 to 18 months, Magnus said.

"It is not beyond the realms of reason to believe that, properly managed, Asian economies can put in a far strong performance regardless of the fact that Japan is still navel-gazing," hesaid.

"But it may be that the politicians are too domestically focussed and not willing to coordinate on the scale required and that would simply mean the recovery process would be drawn out that much longer," Magnus said.

Warburg Dillon Read predicts Asia's GDP will grow by about one per cent in 1999.

"That doesn't actually speak recovery, it simply says that 1999 is not going to be as bad as 1998 for many of the economies," Magnus said, adding that it would be at least 2000 before significant growth returned to the region.