The yen depreciated after Aso said authorities could intervene in foreign exchange markets to stem the Japanese currency's rise.

Since the start of April, the yen has appreciated by about 4 percent to 17-month highs against the US dollar as concerns about a global economic slowdown push traders into safe-haven assets.

Finance Minister Aso said the country's leaders were ready to take action as needed if there were more extreme movements in the foreign exchange market, Bloomberg reported.

Aso's comments follow similar announcements last week from himself and the government's top spokesman. Those statements, however, appeared to contradict Prime Minister Shinzo Abe, who pledged to avoid an "arbitrary" intervention.

Nevertheless, Japanese officials have tried to qualify Abe's remarks, saying moves to halt the currency's "one-sided, speculative" rally would not breach a G20 agreement to avoid competitive currency devaluations.

Currency wars?

The last time Tokyo intervened in currency markets was at the end of 2011, when it tried to arrest the yen's surge in a bid to support its economic recovery following the quake-tsunami disaster earlier that year.

The government fears a stronger yen would negatively affect the nation's exports and hurt corporate profits.

The Abe administration has been struggling to bolster economic growth and end the deflationary spiral that has plagued the Japanese economy for the good part of the past two decades.

But there are fears that a unilateral intervention by Japan in foreign exchange markets could lead to competitive devaluations across the board.

On Tuesday, the dollar rose to 108.25 yen in Japanese trade, from 107.94 yen in New York. Tokyo's Nikkei, which has been among the worst performers this year, enjoyed a rare rally to add 1.1 percent, thanks to a dip in the yen, which supports exporters.

sri/cjc (AFP, Reuters)