The outlook for the world's second most important currency - the yen - darkened last night as investors began dumping the currency and buying US dollars. The failure of finance ministers and central bank governors from the Group of Seven leading industrialised nations to commit themselves to support the yen unleashed a wave of selling that drove the currency downwards. Yesterday, the dollar soared two yen to 131.33 yen in a bid to reverse the latter's audacious 4.5 per cent rise last week, capped by the Bank of Japan through an estimated US$10 billion of dollar sales. 'It was just one-way traffic this morning,' said the head of one dealing desk. 'The market has seen what the G7 has done - or not done - and dollar-yen has gone bid again.' Foreign exchange strategists said the prospects for the yen were extremely bleak. 'We're looking for 150 yen by the end of the year . . . it may peak at 155 by the autumn,' Avinash Persaud, head of currency research at JP Morgan, said. 'The 150 level is the top of the range . . . I think it is the big line in the sand,' said Ian Amstad, chief international economist at Bankers Trust. He said unless Japan effected substantial economic measures, the market would continue to view the economy negatively, and look to sell the yen. Analysts said instead of outlining a common strategy to help the yen, the G7 communique adopted the usual language of monitoring exchange rate movements and co-operating only as appropriate - although stressing the need to avoid excessive currency declines that could lead to large external imbalances. 'The G7 [meeting] must be very disappointing for Japan. There is clearly no commitment to defend the Japanese yen,' Mr Persaud said. 'There had been a fear of concerted [G7] intervention and that fear must now be fading. Dollar-yen must go higher.' He said Japan's authorities needed to abandon their aim of achieving a budget deficit to gross domestic product ratio of 3 per cent by 2005 and implement aggressive tax cuts before the market would take notice. Mr Persaud said even this might not be enough, given highly depressed consumer and business confidence in Japan. 'The Japanese consumer is so blighted by rising unemployment that he is going to take that tax cut and save it rather than spend it.' New York analysts said they were concerned no one could figure out how to re-invigorate the Japanese economy because the Japanese consumer lacked confidence. They said the economy would continue to struggle until efforts were made to clean up the domestic banking and political system. One analyst said: 'The marketplace is much bigger than they [the G7] are and it will determine the [yen's] value.' Much of the dollar's rise was now being attributed to Japanese investors - suffering under historically low interest rates - saving much more than they were spending, and consequently investing their surplus savings abroad where returns were better. Traders said the yen was set to revisit its 6.5-year low of 135.05 yen, reached earlier this month, over the next few days. Barclays Capital chief currency economist Brian Martin said comments made yesterday by Bank of Japan (BOJ) governor Masaru Hayami that he was unconcerned by the yen's fall - later backed up by Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong - had served to further undermine the currency. 'The BOJ has completely negated anything it had achieved through the intervention last week,' he said. 'I think dollar-yen will continue to go up,' he said. Analysts supported the G7's encouragement of the Japanese Government to continue with its efforts to stimulate the economy, but were sceptical about the progress being made. US Treasury Secretary Robert Rubin said: 'The key is to get domestic demand leading growth.' Mr Rubin said all ministers agreed about the importance of a strong Japanese economy to the rest of Asia - 'particularly Asian countries in trouble'. He said ministers did not discuss joint intervention to prop up the yen, but urged Japan to continue fiscal stimulus measures.