UPDATE 1-Japan Fujii says shouldn't devalue currencies

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* Fujii repeats warning against currency devaluation

* Democrats don't favour weakening yen to benefit exporters

By Tetsushi Kajimoto

OSAKA, Japan, Oct 15 (Reuters) - Japanese Finance Minister Hirohisa Fujii reiterated on Thursday that countries must not compete in devaluing their currency to help their exports.

"Currency dumping in 1930 ruined the world economy," Fujii said in a meeting with business leaders in Osaka, western Japan.

He also repeated his view that Japan should not rely too much on exports for economic growth and that the new Democratic Party-led government is striving to turn the economy into one led by domestic demand.

The dollar briefly dipped against the yen after Fujii's comments, but the impact was limited as the greenback remained above the intraday low of 89.27 yen JPY=.

Since becoming finance minister last month, Fujii has caused turbulence in currency markets by repeatedly saying a strong yen could help expand Japan's domestic demand and that the country should not weaken the yen to protect exporters' earnings.

The Democratic Party has been critical of the policies of the previous government led by the Liberal Democratic Party (LDP), saying it catered too much to the corporate sector at the expense of ordinary people.

Fujii has since tried to tone down his rhetoric on currencies by saying he never explicitly called for a stronger currency and that the Finance Ministry could intervene if foreign exchange moves got out of hand.

Earlier, Fujii was quoted by Jiji news agency as saying a stable currency was important both domestically and internationally.

Japan's authorities under the LDP intervened heavily earlier in the decade to stop a rising yen from harming exports. But the authorities have not intervened since March 2004, the end of a 15-month long spree in which they sold 35 trillion yen ($391.3 billion) to shield a struggling economy. ($1=89.43 Yen) (Reporting by Tetsushi Kajimoto; Editing by Michael Watson)