China is repeating Japan's worst mistakes in the asset bubble of the 1980s and could soon come down to earth with a "rude shock", a top Japanese official has warned. Hiroshi Watanabe, head of international affairs at Japan's finance ministry, said the speculative excesses in China could set off a regional crisis. He added: "We are very worried about the situation. The enormous inflow of funds into China over the last year is creating excess liquidity, which the authorities have so far been unable to sterilise in the domestic markets. We're seeing a bubble similar to what we had in Japan in the 1980s. Just look at property prices in Shanghai," he said. "We have an old Asian proverb: the higher the mountain, the deeper the valley," he said, predicting an "abrupt adjustment" with serious knock-on effects on South Korea, Thailand and, less directly, on Japan.Japan's property and stock bubble peaked with a speculative surge in 1989, when a single square mile of Tokyo was theoretically worth more than many of the world's countries. More than 15 years later, the Nikkei stock index is just 28pc of its former value, while the economy is facing its eighth year of outright price deflation. Mr Watanabe said Beijing faced the risk of a peasants' revolt as it prepares to revalue its currency under US pressure. He added: "Let's not forget that China's agriculture is very uncompetitive and would risk being driven onto the ropes by imports of foreign food. Beijing cannot allow a surge in the numbers of unemployed farm workers, especially at a time when coastal industry is absorbing less manpower," he told the Italian financial newspaper, Il Sole.