The yen yesterday breached Y140 against the US dollar for the first time in seven years, putting the Group of Seven industrialised countries under renewed pressure to support the Japanese currency.

Deputy finance ministers of the G7 are to discuss the weakness of the Japanese currency at a meeting in Paris today, and Japanese officials are to press for a joint statement of support for the currency.

Although today's meeting was called primarily to address Russia's financial crisis and last month's G7 summit failed to offer support for the yen in its final communique, Japan hopes yesterday's weakness will prompt action.

In Tokyo trading, the Japanese currency weakened to Y140.7 to the dollar from Y139.7 on Friday. The weakness was caused by concern about the contrast between economic growth in the US and the contraction of the Japanese economy.

The fall of the yen sent shudders through Asia's financial markets. Currencies and shares fell sharply on fears of a further round of devaluations and protracted economic instability in the region. The Taiwanese dollar closed at an 11-year low against the US dollar, the Australian dollar hit a 12-year low, breaching the 60 US cents level, while the Malaysian ringgit and the Thai baht also fell. In Hong Kong, money market interest rose to fend off pressure on the currency, which is pegged to the US dollar. The benchmark three-month interest rate climbed from 8.5 per cent to 9.25 per cent, although it eased in late trading.

"I would have thought we have reached the stage where it is worth the G7 acting," said Richard Jerram, economist at ING Barings in Tokyo. "The crucial question now is whether China will devalue." An influential Chinese newspaper close to the state council (cabinet) yesterday said the renminbi would not be devalued even if the yen declined a further 20 per cent.

In Japan, Koji Tanami, vice finance minister, said the ministry was prepared to take "decisive action" to back the currency. Mr Ryutaro Hashimoto, Japan's prime minister, said he was "watching" the trend.

However, there was little sign that the Bank of Japan had actively intervened in the markets. It spent an estimated $18 billion supporting the currency in April, but does not appear to have intervened since.

Some Japanese government officials say that intervention will be ineffective without a change in government policy, or better economic news.

On Friday, US data showed that employment was continuing to rise in the US on the back of healthy economic growth, apparently without creating substantial inflationary pressures.

However, according to a Reuters survey, analysts expect statistics on Japanese gross domestic product, due on Friday, to show that the Japanese economy contracted 0.4 per cent between January and March this year. This would be the second quarter of decline and so leave Japan meeting the technical definition of recession.

The yen is also being weighed down by concerns over the banking sector and an impending Ministry of Finance reshuffle.

The latter may involve officials such as Eisuke Sakakibara, the vice-minister of finance for International Affairs, who has traditionally played a key role in the currency markets.