Finance ministers from the Association of Southeast Asian Nations (Asean) as well as China, Japan and South Korea also voiced optimism about prospects for their economies while noting such risks as slowing global growth.

A decade after the regional financial crisis, ministers are now concerned about a tide of capital flowing into the smaller economies, whose exporters are struggling with stronger currencies that damage their competitiveness.

While in 1997 many countries in the region were running current account deficits, several now have large surpluses and swelling foreign exchange reserves because of their export-driven expansions.

"The major risk facing a country like Thailand today is very similar to the risk back in 1997, ie the risk of volatile capital flows," said Thailand's Finance Minister Chalongphob Sussangkarn.

"The difference is that the risk at that time was on capital outflows while the risk today is on capital inflows. This is probably something that a single country will find difficult to deal with alone," he said.

In an effort to bolster their defences, ministers agreed in principle on a system of pooled foreign currency reserves to replace the existing bilateral emergency currency swap system.

Japanese Finance Minister Koji Omi hailed the agreement as "a very large step going forward."

In the wake of the 1997 Asian financial crisis, the 10 Asean nations plus Japan, China and South Korea agreed to set up a bilateral currency swap scheme known as the Chiang Mai Initiative in a bid to prevent a repeat of the turmoil.

Although the full details have yet to be thrashed out, the idea of the overhaul is to enable a country to borrow foreign currency from another more quickly to shore up its international reserves until a crisis passes.

Ministers also welcomed "the continued strong growth" of their economies, which are enjoying rapid growth driven by powerhouse China.

At the same time they noted such risks as spillover effects from slowing overseas economies, large global economic imbalances, greater financial market volatility, rising signs of protectionism and resurgent oil prices.

"We recognised the increased globalisation of economies and agreed on the importance of policies that strengthen the region's resilience," the ministers said in a joint statement after the meeting in Kyoto, Japan.

Asia now holds the bulk of the world's foreign reserves at some 2.7 trillion dollars, led by China, which alone has more than one trillion dollars.

Economists warn that the reserves are far in excess of what is needed to ensure stability, leaving the risk of asset bubbles.

But China for one is reluctant to relax its currency regime too quickly so as to reduce its huge current account surplus which is behind the build-up of the huge reserves.

"We want to manage Chinese capital flows very carefully," said Yu Yongding, director of the Chinese Academy of Social Science.

"We don't want speculators to attack China like they have been doing in the rest of Asia," he told a seminar on the sidelines of the Asian Development Bank's annual meeting where the finance ministers gathered.

Last year, the 10 Asean nations along with China, Japan and South Korea agreed to study the creation of a single Asian currency akin to the euro, but ministers said the issue was not even discussed this time around.

Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.