Japan should head off the looming financial crisis by printing more money and buying assets, according to Lehman Brothers global chief economist John Llewellyn. Deflation had destroyed the value of Japanese assets such as urban land, which exacerbated non-performing loans at banks. 'At the minimum, they've got to arrest deflation, and for us, for me, that requires an unorthodox monetary policy, in which a government agency or a range of government agencies should buy a range of assets on the open market and be financed using money which in effect has been printed by the Bank of Japan,' Mr Llewellyn said. '[If the bank] prints money in sufficient quantities, you start to bid up the range of assets that you are buying . . . at a minimum, you'll get rid of deflation.' 'But the range of assets you'd buy would include non-performing loans, land, buildings, bonds, stocks and foreign bonds if you like, to push the currency down.' However, recapitalising bank loans would require as-yet-unseen levels of co-operation between the Bank of Japan, the Ministry of Finance and political institutions. He said most countries could live with the yen sinking to 140 or 145 yen to the US dollar. 'The Hong Kong dollar peg is likely to survive anything the yen is likely to do because the real test of the Hong Kong peg has been the strength of the US dollar,' Mr Llewellyn said. However, Hong Kong would perform well this year with gross domestic product growth of 3 per cent. 'We expect recovery to start in the first quarter in the United States and maybe the European Union, but we expect the recovery to be modest,' he said.