For the Asia-Pacific region as a whole, 2005 was a year of economic growth and relative political stability.

This came despite the enormous tsunami tragedy that hit the region at the end of 2004, the disastrous earthquake in Pakistan and India in October, and the huge spike in energy prices.

It also came despite serious concerns about North Korea's nuclear weapons, the implications of enormous trans-Pacific financial and trade imbalances, and the potential for an avian flu pandemic.

Vicious dogs all and growling, but last year none seriously barked.

What about 2006? All indications are that it is likely to be another year of growth and relative stability amid all the change occurring in Asia's dynamic societies.

China, Vietnam and India expect to maintain their high rates of economic growth.

Japan's growth of around 2.5 percent leaves much to be desired, but the Nikkei is up, unemployment and excess manufacturing capacity are falling, consumer and business confidence are returning, banks are lending again, and wages are rising modestly.

Political leadership will be stable. Remarkably, there are almost no scheduled national elections in 2006, in contrast to the past two years, during which there were national elections or leadership changes in the Philippines, Thailand, Japan, Indonesia, Malaysia, Singapore, Sri Lanka, Australia, New Zealand, Hong Kong and Taiwan.

Several governments are weak, and a couple may not last out the year, but the only certain leadership change comes in Japan. Retiring Prime Minister Koizumi will be missed, as he brought needed stability after 13 prime ministers in 14 years before he assumed office. Thanks to his party's victory in last year's polls, he will be replaced from within his own party's ranks.

Despite this optimistic outlook, the recent natural disasters and memories of the 1997-98 financial crisis show that stability cannot be taken for granted. Moreover, the three dogs that didn't bark in 2005 — North Korea, the economic imbalances and a potential pandemic — are still there, and any one of them has the potential to change the outlook.

A new growling dog has joined them — the downward spiral in Sino-Japanese relations.

Much international effort has gone into the frustrating North Korean situation. A serious effort last year by new U.S. Assistant Secretary of State Christopher Hill to break the long-standing stalemate came to naught when Pyongyang unrealistically demanded a nuclear power facility before it gives up its nuclear program.

The danger is now that after more than three years of un-productive discussions, few will find compelling reasons to continue to invest time and energy in so elusive a process.

The costs may increasingly appear to outweigh the limited direct dangers of a small North Korean nuclear program. But there are still tremendous risks. One is the chance that North Korean fissile material could be transferred or fall into the hands of terrorists.

Moreover, if there is a nuclear terrorist attack or dirty bomb, North Korea would be the No. 1 suspect, triggering a profound political and international-relations crisis.

The avian flu potential is similar. The chances of a pandemic are limited, but if one happens, it will make the recent tsunami, hurricane and earthquake disasters pale in comparison. Avian flu is now deeply embedded in Asian bird populations, causing some $10 billion in poultry losses last year. Almost 80 humans, mostly Southeast Asians have died from close contact with birds, but the virus has not evolved into a form transmissible among humans.

The World Health Organization believes that the risk of a global pandemic is higher than it has been since the Asian flu virus of 1968, but only in the past few months has the region's leadership started serious planning to avert a crisis. The preparations remain far from complete.

The enormous and still growing U.S. trade and budget deficits have their counterpart in Asian trade surpluses and vast foreign exchange reserves, including $2 trillion in U.S. dollar holdings. Economists say that the current trends are unsustainable.

The danger is that if Asian central banks unload or reduce dollar holdings, the value of the dollar will drop, U.S. interest rates will rise, and the U.S. housing boom will come to an abrupt end, potentially pitching the country into a serious recession.

This would also be enormously damaging to Asia due to the decreased value of its remaining dollar holdings and investments and the recession in its largest and most profitable market.

Barring irrational behavior, there should be time to wind down these imbalances. But to do this requires a set of forceful policy actions on both sides of the Pacific to strengthen U.S. savings and fiscal responsibility, and to loosen Asian currency controls and constraints on consumer spending. Unfortunately, current trends are widening the imbalances.

There was a marked deterioration of Sino-Japanese relations in 2005. The supposed catalysts for these tensions, Koizumi's visits to the Yasukuni Shrine and the language of some Japanese textbooks, are not new, which suggests that deeper, more dangerous forces of nationalism and international competition are at work.

Sustained and growing tensions can have seriously negative implications for U.S. interests by complicating regional endeavors, such as addressing the critical North Korean nuclear issue and the trans-Pacific trade and financial imbalances. They also make the rationalization of U.S. forward military forces appear more threatening to China.

So far, the United States has neither fully focused on the implications for us of Sino-Japanese tensions nor begun to develop a behind-the-scenes approach to try to dampen them.

In the Chinese calendar system, 2006 is the Year of the Dog. The challenge for the leaders of the region is to continue to keep these dogs quiet.