Plunging Japanese yen pulls down world markets

The Japanese currency collapsed through the 141-yen barrier against the dollar in Tokyo Wednesday, falling to a new seven-year low and punishing stock markets across Asia. Deputy US Treasury Secretary Lawrence Summers said at a Parismeeting of deputy finance ministers from the Group of Seven industrialised nations had discussed the weak yen.

Hong Kong’s Hang Seng index plunged 4.9 per cent, following a 2.3 per cent fall the previous day. In Bangkok the Stock Exchange of Thailand’s index hit a 10-year low, dragged down by the yen, losing five per cent by mid-afternoon trade. South Korean share prices dropped 4.3 percent and prices fell more than two percent in Singapore, Malaysia and Taiwan by the end of their morning sessions.

He said past US and Japanese concerns “regarding the weakness of the yen and the possible adverse consequences for the Asian and global economy were highlighted". Just before he spoke the yen was driven to a low of 141.57 yen, its worst rate since June 1991. The currency was sharply down from 140.20 yen in mid-morning here and 140.15 yen in New York late Tuesday. China has already admitted its economy is being hurt by the slump in Japan, where falling consumer demand is restraining Asian recovery and a weakyen is pressuring Beijing to devalue the yuan.

Tokyo has pinned its hopes on a record-sized 16.6 trillion yen (125 billion dollar) stimulus package announced in April, although official figures out Friday are widely expected to confirm the world’s second largest economy has been in recession since late last year.

“The basic stance of the United States is that some measures on the foreign exchange trade will be taken after Japan has done all it can do domestically," he said.

Hong Kong stocks plunged 412.09 points or 4.91 per cent today to close at 7,979.37, the lowest since the Asian financial turmoil. The key Hang Seng index went down 129.71 points, or 1.55 per cent, to open at 8,261.75. It plunged 355.29 points, or 4.23 per cent, to close at 8,036.17 at midday. The share price then fluctuated around the 8,000-point mark after the market resumed in the afternoon, reports Xinhua news agency from Hong Kong.

Dealers attributed the loss of the Hang Seng index in two straight days to the negative impactof the weakness of the Japanese yen and higher interbank interest rates. Meanwhile, the chief executive of Hong Kong special administrative region, Tung Chee-Hwa, today warned that any deviation from the long-held philosophy of fiscal prudence may give rise to speculative attacks again on the Hong Kong dollar. Tung made the remarks in response to calls for further tax cuts in order to pull Hong Kong out of the current economic woes. He told an economic conference today that the result of the deviation may well be another increase in the high interest rate.

GDRs too slump

MUMBAI: The Skindia GDR index touched an all-time low of 646.99 points during the intra-day’s session to register a net fall of 7.29% over Tuesday’s close. Over 60% of Indian GDRs recorded new lows on overseas stock exchanges today. Among the worst hit were Videocon Intl and Arvind Mills which traded at $ 2.35 and $ 1.15 respectively to record losses to the tune of 21.67% and 14.29%.