Japan will take decisive action against any speculative moves in the currency market, Finance Minister Yoshihiko Noda said Monday, signaling readiness to intervene to stem further yen rises after its spike to a record high last week.

Noda said he saw recent yen rises as even more one-sided than before and that Tokyo would exchange information closely with other countries regarding currencies, suggesting it would stay in frequent contact with its Group of Seven partners.

We will watch markets even more closely than before to see whether there is any speculative activity. We won't rule out any measures and will take decisive action when necessary, Noda told reporters.

Trade Minister Banri Kaieda, who does not have jurisdiction over currency policy but who along with Noda is a contender to replace outgoing Premier Naoto Kan, also said Monday that it would be best if Japan and the United States could jointly intervene in the currency market, Kyodo news agency reported.

One way might have been for Japan to closely communicate with the United States last week, and jointly intervene when markets in Tokyo opened on Monday morning, Kaieda was quoted as saying on a television program.

Intervention is aimed at teaching (market players) that if they buy the yen too much, they will get burned, he said.


Top government spokesman Yukio Edano also said he was very concerned about recent yen rises and was watching with even more caution than before for any speculative moves in the market, Reuters reported.

Tokyo intervened unilaterally in the currency market and eased monetary policy Aug. 4. But the steps have not stopped investors from seeking the yen as a safe haven against risk, with the greenback hitting a record low of 75.95 yen last Friday.

The dollar bounced back and briefly hit a one-and-a-half week high of 77.23 yen Monday as market expectations of currency intervention kept investors from testing the downside. The prospect of intervention also limited losses in Tokyo's Nikkei stock average.

Markets are bracing for another round of intervention but doubt whether it will be effective in sustainably weakening the yen, particularly with little chance that Tokyo can persuade its G7 counterparts to act jointly in the currency market.

I don't think Japan will intervene as long as the dollar stays around current levels above 76.50 yen. But if it falls back below 75, it may step in. The authorities are ready to act at any time and that's probably the message they are trying to send, said Naoki Iizuka, senior economist at Mizuho Securities.

Stock prices may briefly rally if Tokyo intervenes. But it would be difficult to change the market's (weak-dollar) trend.

If the government were to intervene, the BOJ is ready to support the yen-weakening effort by holding off from draining the extra yen that flows to the markets via intervention, and possibly by easing monetary policy further.

The BOJ will consider loosening policy, possibly before its next rate review in September, if yen gains push down Tokyo stock prices enough to hit business sentiment, sources familiar with the central bank's thinking have said.

Policymakers, however, are caught in a dilemma. They know the limits of trying to stem yen rises with policy action. But if they hold off on meeting words with action for too long, the effect of verbal warnings will quickly fade.

Upcoming events that may drive down the dollar, such as Federal Reserve Chairman Ben Bernanke's speech on Friday in Jackson Hole, Wyoming, and U.S. payrolls data on Sept. 2, may also wipe out any yen-weakening effect if Tokyo acts now.

Any currency intervention and monetary easing would thus be more of a symbolic attempt to show the authorities' determination to address yen rises, as Japanese companies complain about the pain from yen gains and threaten to shift production overseas, analysts say.

(Reporting by Kaori Kaneko and Leika Kihara; Editing by Edmund Klamann and Joseph Radford)