Japan's new finance minister, Naoto Kan, said he wanted the yen to weaken more and would work with the Bank of Japan to bring the currency to an appropriate level given its impact on the economy.
The dollar jumped half a yen after Mr Kan's comments on the view that he will be more inclined to act against excessive yen rises that could hurt the export-driven economy, though some analysts questioned how the markets would interpret his comments.
"Kan is known to make sharp comments when it comes to parliamentary debate, but it is uncertain whether he is good at communicating with markets and it may take time for markets to fully understand his ability," said Satoru Ogasawara an economist at Credit Suisse.
Mr Kan also told his first news conference since being appointed that he hadn't thought once about fiscal austerity when the government compiled the 2010/11 budget. He added that whether Japan should continue with stimulus spending would depend on how the economy fares in future.
"Many businesses say it is appropriate for the dollar to be around 95 yen for trade, so we must work with the Bank of Japan to bring it to appropriate levels taking into account the various effects currencies may have on the Japanese economy," said Mr Kan, who is also deputy prime minister.
"At the moment, (dollar/yen) has largely corrected to a weak yen compared with the time when the so-called Dubai shock occurred. It would be nice if the yen weakened a bit more."
Mr Kan was named yesterday to replace 77-year-old Hirohisa Fujii, who stepped down for health reasons.
"It clearly would be helpful if the yen weakened a little bit so the Japanese can share in some of the robust growth that some of its trade competitors like South Korea and Taiwan have enjoyed," said Glenn Maguire, Asia chief economist at Societe Generale, although he did not see a return to currency intervention.
"There is clearly a change of tone that reflects the deterioration of the economic environment since the DPJ was swept to power," he said, referring to the ruling Democratic Party of Japan, which won an election last August.
Mr Kan has criticised the BOJ for being too rosy in its view of the economy and has pressured the central bank into easing its already hyper-loose monetary policy.
Reuters