A conference statement said that the 700 business leaders, economists and policy-makers at the annual East Asia Economic Summit were deeply worried that the world was heading for a recession.

They believed "strong and bold actions must be taken immediately," the statement said.

It said the United States, Canada and Europe "should adopt significant cuts in interest rates and Japan should further expand its money supply".

The Western nations should also cut taxes if their economies looked like deteriorating further in the next few months, it said.

They should also immediately expand official loans and credit to emerging markets, the declaration said.

But it said that Japan, with an economy twice as big as the rest of Asia put together, bore a special responsibility to dragthe region out of the mire.

"To do so, Japan must undertake strong and bold measures to recapitalize its financial sector and adopt a dynamic, growth promoting fiscal policy with an emphasis on expanding domestic consumption," it said.

It said Japan, which has just adopted a plan to recapitalize its ailing banks and promised $30 billion in aid to Asia, was taking positive steps but urged it to implement them without delay.

Other Asia countries should commit to maintaining open markets or risk being "the biggest losers in a worldwide lurch towards protectionism", it said.

They should also restructure their corporate debts rapidly with help from the West to serve as a model for other emerging markets, the statement said.

The Asian nations should also "review the prudential limits on short-term capital inflows, including limits on short-term foreign debt", it added.

And they should commit themselves "to further openness to foreign direct investment, including in sectors that were previouslyrestricted to foreign ownership, such as banking and infrastructure", it said.

The Group of Seven (G7) major industrialised powers should undertake a new regulatory regime for monitoring short-term financial flows, off-balance sheet commitments and derivatives.

"These measure, taken together, would constitute a critical step towards a renewal of world growth, which is now the critical condition to stabilizing emerging economies and world markets," it said.

"They would also set the basis for the establishment of a new global financial architecture that responds to the realities of an open global economy, providing for the needs of both the emerging and advanced economies."