UPDATE 1-Japan officials step up warning against yen rise

* Dollar hit fresh 17-mth low below 108 yen

* Japan seen hesitant to intervene in market

* Aso says to take steps as needed, mum on intervention

* Govt watching if any speculative moves - econmin (Adds quotes, econmin, MOF official, details)

By Tetsushi Kajimoto

TOKYO, April 8 (Reuters) - Japanese Finance Minister Taro Aso on Friday ratcheted up the warning against a rapid rise in the yen, saying the government would take steps as needed to counter “one-sided” moves in the currency market.

The dollar fell below 108 yen for the first time in 17 months on Thursday with investors betting that Japan would refrain from intervention.

Aso called the forex market’s recent moves “one-sided”, and said rapid movements were undesirable, reiterating verbal warnings made by Japanese officials on Thursday.

“A rapid move toward either yen rise or yen fall is not desirable. It is desirable that currencies are stable at levels that match the economy’s fundamentals,” Aso told reporters after a cabinet meeting.

He declined to comment on the possibility of intervention.

“As the G20 confirms, excess volatility and disorderly moves in the exchange market hurts (economy), so we are watching currency moves with a sense of urgency. We will take necessary steps under certain circumstances,” he said.

Aso added that it is premature to comment on how the current yen rise would affect the Japanese economy.

The dollar last traded at around 108.90 yen, cooling exporter sentiment and weighing heavily on Japan’s fight against deflation. With both external and domestic demand weakening, Japan is seen teetering on the edge of another recession.

The dollar has fallen nearly 10 percent against the yen for the year, with the past week accounting for roughly 3 percent of the move.

Economy Minister Nobuteru Ishihara suggested that there may be speculative moves behind the recent yen gains, saying that he does not see any domestic economic factors that would cause the yen to rise.

The government is closely watching moves by speculative players in the foreign exchange market, he told a separate news conference.

A finance ministry official was quoted by Jiji newsagency as saying that the recent moves in the foreign exchange market was driven by speculators.

While global concerns over a currency war linger, Japan has stayed away from the markets since it last intervened in November 2011 to stem a strong yen. (Reporting by Tetsushi Kajimoto; additional reporting by Minami Funakoshi; Editing by Chang-Ran Kim & Shri Navaratnam)