For the first time since June 1991, the yen Monday dropped to a seven-year low against the dollar in Tokyo on indications that the strong U.S. economy would continue and the anemic Japanese one would get worse before getting better.
As of 5 p.m., the dollar was quoted at 140.54-57 yen, up more than a yen from the 139.41-44 yen recorded on Friday. It rose as high as 140.73 yen in morning trading. As the yen grew weaker, trading on the Tokyo Stock Exchange slowed, and the 225-issue Nikkei average fell 28.72 points, closing at 15,294.71.
Several Japanese authorities decried the yen's weakness, which created a sense of caution in the market, many dealers said. "We have decisive steps ready for (halting the decline of the yen)," said Finance Minister Hikaru Matsunaga, hinting at central bank intervention.
Prime Minister Ryutaro Hashimoto also told reporters he was closely monitoring the yen.
On the floor, dealers focused attention on whether the G-7 deputies would indicate supportive measures for the yen against the dollar. Many believe a bailout plan to help Russia get out of its financial trouble will be the main subject of discussion at the G-7 meeting, leading many dealers to doubt the possibility that joint market intervention by financial authorities will take place to halt the dollar's rise.
As the yen plunged below the 140 level, Vice Finance Minister Koji Tanami said the G-7 countries were concerned about an excessively depreciated yen in relation to the dollar. He told reporters later in the afternoon the ministry would "act decisively," and that if the yen dropped too quickly it would hurt not only the domestic economy but those in Asia as well.