By Ambrose Evans-Pritchard, International business editor

The country's exports plunged 10.3pc in September from a year ago, dimming hopes of rapid recovery in the Far East. Exports to Europe crashed 21pc. Shipments to China fell 14pc as the Diaoyu-Senkaku islands dispute led to a slump in car sales. Honda, Mazda, and Nissan all saw sales plunge near 30pc as Chinese consumers boycotted Japanese brands. Nomura said the export slump will push country into full recession.

Stephen Jen from SLJ Macro Partners said the global storm is drifting eastwards into Asia, opening a "third chapter" of the crisis that will last well into 2013. "Many analysts have declared that the low in the global economic cycle is in place. We are not convinced," he said, prediticting a rise in currency protectionism.

Japan is the awakening giant in this conflict. The yen has risen 30pc against China's yuan, 65pc against the euro, and 80pc against Sterling since 2008. Tokyo is itching to fight back.

Yen strength is Japan's curse. It rises on safe-haven flows during global downturns, choking the economy. This stems from Japan's bitter-sweet role as top creditor with $3 trillion of net assets.

Hans Redeker from Morgan Stanley says this pattern may soon change as political upheaval in Tokyo and surging public debt of 245pc of GDP usher in an era of devaluation.

The Liberal Democratic Party (LDP) -- likely to win the Diet vote expected in December -- has written into its manifesto that the Bank of Japan should switch to a inflation and currency target. Pressure is growing for quantitative easing on a much greater scale to break out of the deflationary trap.

Mr Redeker expects the yen to weaken from 79 to 84 by Christmas, reaching 90 next year. "We think Japan will no longer be able to fund government debt (JGBs) from domestic investors as soon as 2015. They will have to print money instead. They can't afford to let bond yields rise because JGBs already make up 25pc of bank balance sheets. A rise in yields would set off a crisis."

Mr Redeker said the yen has been kept strong by Japanese insurers and pension funds hedging their $1.8 trillion holdings of foreign bonds with currency swaps. They are now fully hedged. This pillar of support has been knocked away.

Klaus Baader from Societe Generale said any attempt to weaken the yen risks disturbing a fragile equilibrium. "A policy of currency depreciation could trigger flight out of Japanese assets. This could trigger a crisis in the JGB market, and do more harm than good," he said.

Mr Baader said Japan should copy the Swiss, who fixed the franc against the euro at CHF 1.20 last year and vowed to defend the line by printing whatever it takes. A yen-dollar peg of 85 or 90 would slow the "hollowing out" of Japan's industry without frightening the horses.

Whatever happens, Japan's days as an export superpower seem numbered. Its once vast current account surplus has vanished altogether since the Fukushima disaster last year. The decision to abandon nuclear power has left the country reliant on imported fuels. It may face soon face a structural trade deficit. The workforce is shrinking ever year as the bulge in pensioners grows bigger. The currency has to give.