The New Paradigmers hold that the internet and other new technologies have set the stage for a long-term boost in

The New Paradigmers hold that the internet and other new technologies have set the stage for a long-term boost in productivity. This prospect, they hold, means the record stock market makes sense.High share prices, in turn, bolster the confidence of American consumers - thereby completing the virtuous economic circle The sceptics say the New Paradigm is an illusion. But if Mr Kuroda plumps for weak yen, the floodgates may open and a selloff of Japanese financial assets could destabilise a still-recovering global financial system.In every nook and cranny of high finance, meanwhile, a debate rages about the US economy. A weak yen, he thinks, will help Japan by helping Japanese exporters.

The gradual appreciation of the yen gave global investors a reason to stick with their yen-denominated assets despite zero interest rates.But Mr Kuroda is thought to be opposed to a strong yen. Two weeks ago, the country's long-time Deputy Minister for International Finance, Eisuke Sakakibara - "Mr Yen" - stepped down. He was replaced by Haruhiko Kuroda.Mr Sakakibara kept the Japanese financial system from haemorrhaging money - despite the fact that interest rates are zero - by allowing the yen to rise. "But these same fund managers have their own money in cash."In parts of the financial world there is now something approaching mute panic about Japan. Maybe there really is something unreal about the good times we're enjoying.The financial world runs these feelings through the prism of its disciplines and comes out with a more sophisticated sense of foreboding."All the US fund managers I talk to have their clients' money fully invested," says investment adviser Andrew Smithers.

We may be in for a modest but not unhealthy expansion of the the economy this year.But virtually everyone, from the shrewdest City fund manager to the most lowly wage slave, shares a sense of foreboding Maybe the best is behind us. Gordon Brown and Eddie George may have engineered a soft landing for the economy. But Alan Greenspan and other Group of Seven central bankers opened the money taps. G7 economic policy makers have acted skilfully to mop up after the emergency.Consumer confidence is rebounding. Investors - at least, US retail investors - barely remember that the New York Stock Exchange actually closed at the height of the panic.And yet, despite the good economic news, there is an underlying economic logic to the Blair-Prescott fight last week. The London and New York stock exchanges may have hit record highs last week.

For a moment it looked as if the whole world was going to follow the region into deflation. But the rest of the world has been insulated because Japan is a nation of savers, and its citizens have been living on savings stuffed in the mattress.Last year the Asian asset bubble collapsed. Since then, Japan has suffered something approaching a 1930s-style deflation. The first great blow to the post-Cold War global economy - the pricking of the Japanese asset bubble - happened before he came to power. The new Cabinet will oversee Phase Two of the Third Way - and middles are always tougher than beginnings.There are, however, no obvious economic reasons for Blair and Prescott to fight.