The effects of the financial turmoil in Asia are beginning to emerge in the industrialised economies, with a sharp decline in export sales to East Asia apparent in the most recently available trade statistics for Japan, the United States and Australia. Manufacturing output has fallen this year in both the United States and the UK, with external demand weakened further by the sustained rise in their real exchange rates over the past eighteen months. Firms in the major economies are facing greater price competition from Asian producers in their main markets. Imports have fallen sharply in the affected Asian economies, and domestic demand has been weak. This has also led to some weakness in most commodity markets. Global demand pressures have been further eased by the continuing downturn in Japan, where the economy is now on the verge of recession. This can only prolong the adjustment process for the smaller Asian economies as Japan is a key export market for them, and raises renewed risks of systemic failure within financial markets. Japan and the five smaller Asian economies directly affected by currency crises last year both account for around 7 per cent of total world trade.