Thailand slapped a tax on foreign investment in government debt on Tuesday, Japan said it could intervene anew to weaken the yen and China again talked down the prospects of a faster rise in the yuan.

After the failure of a weekend International Monetary Fund meeting to defuse escalating forex tensions, Asian governments are redoubling efforts to resist capital inflows that are boosting their currencies and undercutting the competitiveness of their exporters.

Thailand's cabinet agreed to impose a 15% withholding tax on capital gains and interest income from foreign investment in government debt in a bid to curb the baht, which is at its highest since the 1997 Asian financial crisis.

With the dollar hovering near 15-year lows against the yen, Japan said it would wade into the foreign exchange market again if need be, despite widespread disapproval by its peers of a bout of dollar buying last month.

And the People's Bank of China applied the brakes to the yuan by setting a weaker midpoint reference rate for the day's trading, while its foreign exchange arm said currency reform did not equate to yuan appreciation.

China's insistence that the yuan's rise must be gradual is a huge obstacle to the appreciation in Asian exchange rates policymakers say is needed to reduce global imbalances.

It, and other countries, counter that the prospect of the Federal Reserve printing money again will flood the world economy with more liquidity, weaken the dollar and push emerging currencies yet higher as investors search for returns with interest rates in the developed world at record lows.

Minutes of the Fed's last policy meeting -- at which it said it stood ready to provide more support for a stuttering economy -- are due at 1800 GMT.

"The Fed minutes will be crucial as we could learn more about the size of potential asset purchases," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.

A second round of quantitative easing by the U.S. central bank would pile more pressure on an already languishing dollar.

Britain too could embark on a second round of asset buying with new money although a Bank of England policymaker said he and his colleagues faced competing risks of not doing enough to curb inflation versus tightening policy too soon.

"It is not obvious what the next direction for monetary policy is," David Miles told a conference in Dublin. "We do have a policy tool, quantitative easing, which ... remains a potentially powerful tool and one that we might come to use."

"DECISIVE STEPS"

The announcement by Thailand came a week after Brazil doubled a tax on foreign portfolio inflows into bonds and some other financial instruments to 4% to reduce upward pressure on the real, its currency.

The baht has risen 11% this year, the second strongest currency in Asia after the yen, pushed up in part by foreign inflows into Thai assets.

Japanese Finance Minister Yoshihiko Noda said he had explained to a weekend meeting of the Group of Seven industrial countries in Washington that Tokyo had intervened on September 15 to prevent destabilizing lurches in exchange rates.

"The G7 reaffirmed that excessive currency moves would hurt stability in the economy and in the financial system ... From this standpoint we will take decisive steps, including intervention, when needed," Noda told a news conference.

With many governments acting against currency appreciation, fears are mounting of a "race to the bottom" that may trigger protectionist trade tariffs that would hobble global growth.

A top Chinese newspaper acknowledged the risk of a conflict.

"The financial crisis could escalate into a currency crisis," the China Securities Journal said in a front-page editorial. "There will be no winner.

The U.S. House of Representatives has already passed a bill that would authorize retaliation against China for holding down the value of the yuan. U.S. Treasury Secretary Timothy Geithner is due to determine by October 15 whether China is "manipulating" its currency to gain an unfair trade advantage.

REFORM DOES NOT EQUAL APPRECIATION

Political pressure on China will mount ahead of a summit in Seoul on November 11-12 of the Group of 20 major economies.

G20 finance ministers gather in South Korea on October 22-23 to prepare the ground after a largely fruitless flurry of exchanges at the weekend during the International Monetary Fund's meeting.

The China Securities Journal said efforts by the United States and Japan to weaken their currencies would generate considerable pressure for a rise in the yuan.

But, far from advocating faster appreciation to help dampen price pressures, the paper said Beijing would have to control the yuan's rate of climb and refrain from raising interest rates in order to ward off inflows of speculative capital.

"Currency reform does not equate to yuan appreciation. The emphasis is more on the improvement of the currency formation mechanism," the State Administration of Foreign Exchange, an arm of the central bank, said in a report.