THE US dollar yesterday climbed to within one yen of breaking back through the 100 yen barrier for the first time since January. Its surge was assisted by shrewd intervention from central banks and left traders, economists and foreign exchange dealers frantically calculating if this was the end of a virtually unbroken five-year decline by the dollar or just a powerful remission. The sudden appearance of the central bankers to accelerate an existing trend suggested to some that there were some deeper political as well as economic factors at work. Growing concern about the accelerating implosion of the Japanese economy was seen as one of the motives behind the move. There have been many warnings that the country was facing a dangerous shift into deflation which could have widespread economic repercussions in Asia and the rest of the world. This is in effect a reversal of the Plaza Accord. In 1985 a meeting of world leaders met at New York's Plaza Hotel and agreed to work to strengthen the yen, which at that time was valued at 250 to the dollar, and regarded as unfairly and dangerously undervalued. With the bursting of the Japanese economic bubble, and the horrendous problems faced by its banking sector, Japan has been looking into a black hole, and the continued strength of the yen could have pushed it in, with who knows what implications for the world. When in April the Japanese faced the impact of an 80-yen dollar, questions were raised as to whether the Plaza policy had gone too far. At that level, few, if any, Japanese companies could profit from exports, while the plummeting cost of imports meant that domestic barriers to outside competition were creaking. The once all-powerful Japanese economy was open to Western diseases of stagnation and rising unemployment. In joining the Bundesbank and the Federal Reserve Board in the support of the dollar, the Bank of Japan was extending Japan's recent strategy aimed at reflating the economy and, at the same time, taking the heat off the yen. The bank has been pumping liquidity into the system in a big way since mid-June, and earlier this month the powerful Ministry of Finance joined in by deregulating the capital markets to encourage insurance companies to shift some of their huge banks of assets abroad. If they take the bait, it would mean strong downward pressure on the yen, but without the currency risks that have made Japanese institutions shy of investing abroad. Under the new rules, the insurance companies can choose to value their investments at market value or cost, a return to an old, and much criticised method of accounting. Pragmatism has won over prudence in this case. Any flow from insurance firms would join an accelerating stream of funds from Japanese companies which have been pouring money into Asia and elsewhere. This trend is unlikely to be suddenly reversed by this week's resurgence in the value of the yen - it was already under way when the currency was well above the 100 to the dollar mark. The trend towards setting up manufacturing plants overseas has been driven by more than the yen. The greying of Japan's population has forced companies to find sources of younger workers elsewhere. If the current level of the yen holds, then there will be some welcome windfall profits for Japanese companies, which have suffered heavily in the translation of overseas profits back into the engorged yen. Analysts in Japan have predicted that the impact could be close to a 20 per cent improvement in pre-tax profits if the yen holds at this level for a further six months. Initial reactions yesterday were that Japan may have seen a suspension of the five-year long appreciation against the dollar - and the charts agree - but the consensus for the longer term is that Japan will still have to face the prospect of a strong yen.