In doing so Japan is distancing itself from the strong US view that controls are ineffective and bad for the global economy.

"Each country has a right to implement policies corresponding to the level of economic development. It would be quite appropriate for them to change those policies if they find them not serving the economy," an official at Japan's ministry of finance (MOF) recently told Reuters.

Malaysian prime minister Mahathir Mohamad took a step back from the free market with the introduction of widespread currency controls last week, a move government officials said was aimed at averting political instability and economic chaos.

Taiwan and Hong Kong also announced measures to defend their currencies and stock markets from being at mercy of global speculators.

"Theargument that regulations of any kind are wrong is a bit too naive and meaningless," the Japanese official said.

"Japan was once a developing country and we had restrictions of all kinds, including controls in the foreign exchange market," he said.

Japan's stance is in clear contrast to the US and International Monetary Fund (IMF) view of stressing the importance of capital liberalisation for developing countries.

"It would be a catastrophe if countries were to develop the idea that somehow withdrawing from the global system was right and that building the foundation for a market economy was wrong," US deputy treasury secretary Lawrence Summers was quoted as saying by the Kyodo news service.

IMF first deputy managing director Stanley Fischer echoed that view, saying on Thursday that foreign exchange controls introduced by Malaysia are a step backward and will bring no long-term benefits.

Another US official said that it would be a very difficult process to make Malaysia controls work.

"The historyof capital controls in most countries is not a happy history," said John Wolf, state department APEC Coordinator and Ambassador to APEC.

Financial analysts in Japan matched the government view of being generally supportive of the moves.

"The move by Malaysia looks effective and it was a necessary step for them to achieve stability in the country's financial system," Hirofumi Ushikoshi, senior economist of economic research department at NLI Research Institute said.

The new controls are reasonable in light of Russia's financial instability and lingering speculation of a currency devaluation in China, he said.

"Hong Kong's measures show its strong willingness to combat speculative selling. It had to commit to the peg in order to drive them out," said Tomomi Okazaki, senior executive researcher at Institute for International Economic Studies.

With economic growth expected to slow in Hong Kong, there was serious danger for its share market or its currency to face attack by speculators, hesaid.