The more things change, the more they stay the same in Japan. Twelve years of falling asset prices have not dimmed official efforts to try and prop them up. With banks three weeks away from closing their books for the year, a familiar pattern of government-backed stock buying, aimed at shoring up the banks' shaky balance sheets, is unfolding. The effort does not seem to be working, with the Nikkei 225 index yesterday closing below the 8,000 level at a 20-year low. Each spiral downward raises the spectre of a financial crisis as the financial ratios of the banks deteriorate. In a game of smoke and mirrors, Tokyo's bureaucrats are hoping to stave off a crisis for another year. Worsening equity markets have unfortunately coincided with a pronounced weakening in the US dollar and hence a rising yen. That in turn worsens Japan's deflation - a root cause of the banks' woes - and promises to choke the prospects for exporters. The government's predictable response has been market intervention. The temporary effect has been to curb the unit's climb but the relief may be temporary. Risk-weary Japanese investors seem to be repatriating funds while the looming threat of a US-led invasion of Iraq and a faltering US economy is undermining confidence in the dollar assets. Each turn down in Japanese stock prices increases the risk of a genuine financial crisis - an event that would ultimately be triggered by a mass withdrawal of savings by depositors, who despite receiving no interest, resolutely leave their cash in banks. That imperative is causing a furious lobbying effort to delay new rules forcing banks to mark assets according to their market value. Officials are denying reports of plans to roll back on new rules, while at the same time arguing all means will be used to avert a crisis. Ultimately, a large-scale nationalisation of Japan's banks seems the only viable long-term solution. This time, however, dramatic reform will have to follow to avoid the economy slipping back into another cycle of decline. Failure to do so will intensify deflation and land the country's borrower of last resort, a hugely indebted government, with sharply higher interest service costs. Each grinding move down in share prices and a failed effort to prop them up delays that outcome but makes it all the more inevitable. The chances are that Japan will again muddle through another financial year-end but the risks are rising for a financial system perilously close to full-system failure.