Currency devaluation - traditionally the last resort of a government in crisis - seems to have become policy in Tokyo.

Over the past few days, the Japanese yen has hit 39-month lows against the US dollar, propelled downwards by a series of uncharacteristically blunt statements from the country's finance chiefs.

Japan's leaders think a weaker yen could provide a welcome economic fillip, making exports more competitive and even helping to reverse debilitating deflation.

A feeble yen helped underpin Japan's astonishing economic success in the 1970s and 1980s, when its car makers, electronics firms and banks bestrode the world.

But for a number of political, economic and market-related reasons, pulling off the same trick now does not look feasible.

Talking in code

The falling yen may be deliberate policy, but the Japanese government is still being somewhat evasive about it.

For days now, top officials have denied that they are setting out deliberately to undermine their own currency.

But they have also held back from condemning the markets, an indication that they are content with the currency's present weakness.

"It's desirable that foreign exchange rates reflect fundamentals," Haruhiko Kuroda, the country's most influential finance ministry official, said - a remark seen as code for hopes that the yen falls further.

Mr Kuroda added that he believed the currency movements reflected "a correction" from a previously overvalued yen.

Asian problems

It is not surprising that officials are talking in veiled terms.

Any explicit attempt to talk down the currency would cause a storm among Japan's trading partners in Asia, whose wobbly currencies are highly correlated with the yen.

"The question is how much yen weakness China and Asia can tolerate," says Divyang Shah, global strategist at consultancy IDEAglobal.

"They may be able to stomach 135 [yen in the US dollar], but if it comes close to 140, eyebrows will start to be raised."

At one point on Wednesday, the yen dropped to 133.37 against the dollar, its lowest level since October 1998, and most forecasters predict it will fall below 140 within the next few months.

If Asia experiences a series of competitive currency devaluations, the fear is that Europe and the United States will suffer, as the cheaper prices of Asian goods make deflation a possibility.

Impractical...

Another key disadvantage of the policy is that it is mighty risky to implement.

Government and central bank attempts to manipulate currency markets - both by verbal nudges and market intervention - have a tendency to backfire.