The yen's one-way slide towards 150 to the US dollar has further blighted prospects for the Hong Kong stock market, according to strategists and brokers.
The accelerated decline of the yen would place downward pressure on other regional currencies, keep interest rates high and set back the pace of recovery, they said.
Such a cocktail is sure to damage a market that is already reeling from recessionary fears after the economy contracted 2 per cent in the first quarter.
'There's no incentive to buy if earnings keep on going down,' Clarion Securities chief economist Enzio von Pfeil said. 'It just magnifies the problems. I can't see anything happening at G7. Don't see Armageddon, but it is fair to say that Japan has stalled the recovery in Asia by six to nine months.' The trigger for yesterday's move by the dollar above 140 yen came as Japanese officials said the yen's predicament would not feature on the agenda at this week's finance ministers' meeting of the Group of Seven leading industrialised nations.
'We've got [yen-dollar at] 150 at year-end. It's going to affect regional currencies and interest rates,' Mr von Pfeil said.
The consequences of an ailing yen have been much discussed this year, with debate focusing on the extent to which a strong yen is a prerequisite for an Asian economic renaissance.
Analysts said an anaemic yen meant Japan would buy fewer regional exports, while its own products would compete more keenly against those from the more advanced economies of South Korea, Malaysia and Singapore. In addition, Japanese firms were likely to invest even less abroad this year.
