* Japanese econ minister says he hopes FX market can find 'balance'
* BOJ meeting, Bernanke's Congressional testimony in focus
* Dollar index stays near-3-yr high
By Sophie Knight
TOKYO, May 21 (Reuters) - The dollar edged up against the yen on Tuesday after Japan's economy minister clarified earlier remarks about the yen's weakness that had toppled the greenback from a 4-1/2 year high in the previous session.
The dollar rose 0.4 percent from late U.S. levels to 102.69 yen, after falling off Friday's 4-1/2 year high of 103.32 in the previous session as economy minister Akira Amari's suggested that the yen's strength had been largely corrected.
Earlier on Tuesday Amari told reporters that he hopes the yen settles at a level that is in line with the country's economic fundamentals and that the currency market finds a balance between the impact on imports and exports.
Amari said he would not comment on whether a correction in excessive yen strength is over or not, although in weekend comments he was reported as saying the currency's excessive strength had largely unwound, triggering a rebound in the yen.
"The weekend comments were misread. He didn't say it in the way it was reported in English," said a Japanese market participant.
"But the recent strength (of the dollar) is faster than expected, that's why I think they're trying to bring it down a bit, but the basic stance is that they prefer to maintain a weakening policy in the long-term."
Half of the 400 Japanese companies questioned in a Reuters survey said the yen has fallen enough, with just 15 percent wanting it to decline further. One third would prefer to see it rebound from its 4-1/2 year low.
Still, holding back the dollar against the yen may prove difficult given expectations that the Federal Reserve will trim its bond purchases sooner than expected.
"We are sticking with the USD-bullish trend and keeping an eye on one of the leading bullish USD currency pairs: USD/JPY. A close below 102.08 in USD/JPY is needed to suggest a reversal to challenge the ongoing bullish USD outlook," wrote Barclays analysts in a note.
The Bank of Japan, which begins a two-day meeting on Tuesday, is expected to keep policy unchanged but could tinker with its bond-buying plan to curb a recent rise in Japanese yields. Analysts said the yen looked set to resume its recent weakening as Tokyo was committed to easier monetary policy.
The market is now awaiting Bernanke's testimony to Congress on Wednesday after recent comments by Fed officials have fueled speculation the U.S. central bank may start to roll back its bond purchases soon.
Against a basket of currencies, the dollar added 0.2 percent from late U.S. levels to 83.877, though it stayed below Friday's peak of 84.371, its highest level since July 2010.
The euro was steady at $1.2879, close to a one-month low of $1.2795 struck on Friday. It strengthened against the yen, buying 131.90, but remained sandwiched between support at 131.11 and resistance at 132.78, a 3-1/2 year peak hit on May 14.
The Australian dollar dropped 0.3 percent to $0.9786, with its decline triggered by gains in the dollar against the yen following Amari's comments on Tuesday. It stayed close to an 11-month low of $0.9711 struck on Friday.
The Aussie has slid 5.6 percent this month, and has only chalked up a 3.2 percent gain against the yen, since the BOJ announced its audacious easing plan on April 4, compared with the U.S. dollar's 10 percent gain.