BOJ checks rates, intervention unlikely

Still, market sources said intervention was highly unlikely in the short term and that authorities were instead aiming to temper the sentiment driving the yen higher.

While the central bank made its presence known in the market, Japan's Finance Minister, Hirohisa Fujii, raised the prospect of a Group of Seven joint statement on currencies to cool the yen's rally.

The dollar slumped to a low of 84.82 yen as investors shunned riskier assets after news about Dubai's debt problems, but it pared its losses after Fujii's comments as his rhetoric was sharper than his remarks on Thursday.

G7 countries issued a statement in October 2008 when the yen rallied against other major currencies, so traders and analysts said a joint statement was possible.

But joint intervention was extremely unlikely, they said. Such action might send the wrong signal at a time when the G7 wants to encourage China to let the yuan rise by maintaining flexible currency markets.

Unilateral intervention by Japan was also unlikely because the yen's rise is largely the result of the dollar's broad weakness, and the BOJ would not have enough financial firepower to reverse the dollar's decline.

The mere threat of joint action though was enough to curb the yen's gains against the dollar, traders said.

"I would respond flexibly to a joint statement on currencies," Fujii told reporters after a cabinet meeting.

Fujii said he was also flexible about contacting currency authorities in the United States and Europe, adding that he was very nervous about currency moves and it was possible Japan could respond.