Masaaki Shirakawa, governor of the Bank of Japan, on Thursday warned of the dangers of underestimating the force of the “vicious spiral between economic deterioration and the financial crisis”.

In a candid speech in New York on the eve of meetings at the International Monetary Fund, Mr Shirakawa said “Japan remains mired in a severe economic downturn” just as US government officials were seeing tentative signs of recovery in the US economy.