Jeremy Stretch, Currency Strategist with NatWest markets on the yen's prospects

By 0800 GMT the dollar had pushed through the 140 yen barrier. Later in the day the yen was trading at 140.72 to the dollar.

The yen is suffering under the continued weakness of the Japanese economy and worries about the debts of Japanese banks.

Japan's finance minister Hikaru Matsunaga warned again about the dollar's strength and threatened "decisive measures" to protect the yen.

Japan's Finance Ministry has had a lot to apologise for this year

However, analysts say the Bank of Japan is not very aggressive about defending the yen, raising questions about the country's monetary policies. One European banker suggested Japan wanted the yen to weaken "to improve export competitiveness."

The weakness of Japan's currency will be high on the agenda when the G7 finance ministers meet on Tuesday in Paris.

China's yuan under pressure

The yen's slump is reverberating around Asia. In Singapore trade, the US dollar was rampant, forcing down the Indonesian ringgit, the Singapore dollar, the Thai baht and the Taiwan dollar.

The yen crashes through the 140 barrier

Australia's and New Zealand's currencies are in trouble as well. On Monday the Australian dollar plunged to a 12-year low, trading at 59.68 US cents.

The New Zealand dollar was at a six-year low, and is facing further selling pressure, after the ratings agency Moody's announced on Friday that it was reviewing the country's credit rating for a possible downgrade.

All this increases the pressure on the Chinese yuan. As currencies across Asia plummet and the yuan maintains its value, Chinese exporters find it more and more difficult to sell their increasingly expensive goods.

China has insisted that the yuan will not be devalued, but Richard Jerram, chief economist at ING Barings in Tokyo, echoes the sentiment of many analysts: "The perception, whether it is correct or not, is that if the yen keeps going down then China will have to devalue as well."

Such a move would have dramatic knock-on effects. All financial experts agree that a devaluation of the yuan would trigger another vicious round of currency depreciations across Asia.

This in turn would hamper Europe's and America's exports into the region as well.

The end of Asia's financial crisis is nigh?

However, not everybody shares this gloomy view of Asia's economic prospects.

The Bank for International Settlements (BIS), known as the central banker's central bank, predicts that the worst economic turmoil in Asia may be over, and that worldwide growth prospects look good.

In a 199-page study the BIS speaks of a "generally happy state of affairs", and says that long-running economic expansion in the United States and Britain is set to continue.

However, the Basel-based bankers say that rekindling growth in Japan will not be easy: "No-one should be under any illusions as to the magnitude of the problems still to be faced and the potential difficulties along the way."