(For more stories on the Japanese economy, click [ID:nECONJP])
* Kan backs away more from remarks favouring weak yen
* Says some countries may discuss China yuan at G7 in Feb
* Policy options left for BOJ, working with it to back econ (Adds background)
By Tetsushi Kajimoto
TOKYO, Jan 14 (Reuters) - Japanese Finance Minister Naoto Kan said on Thursday that exchange rates should be set by markets unless they move rapidly, backing further away from his remarks last week in favour of a weak yen.
Kan also said some countries may discuss the issue of the Chinese yuan at the Group of Seven finance chiefs’ meeting in Canada next month, adding that he would closely watch any such debate as it could affect the Japanese economy.
“Currencies should basically be set by the markets, and this principle has been agreed internationally,” Kan, who is also deputy prime minister, told reporters in a group interview.
“Unless a rapid move occurs, I will act on this principle.”
Kan, 63, has taken over as finance minister from 77-year-old Hirohisa Fujii, who stepped down last week for health reasons. [ID:nTOE60601A]
In a phone call on Monday evening, Kan shared his view with U.S. Treasury Secretary Timothy Geithner that currency market stability was desirable, adding that he would attend the February G7 meeting.
Kan said on Thursday that the G7 ministers should discuss how they will help their economies recover from the financial crisis while cooperating with each other as necessary.
The G7 has been promoting currency flexibility to try to rectify global economic imbalances.
Canadian Finance Minister Jim Flaherty on Monday called for “more movement” in some Asian currencies, saying that he expected currency disorder to be discussed at G7, G8 and G20 meetings that Canada will host or chair this year. [ID:nN11115376]
Western countries with free-floating currencies have long complained that China’s yuan is kept artificially low, giving China an unfair export advantage and hindering more balanced global growth.
In his first press briefing as finance minister last week, Kan jolted financial markets by saying he hoped the yen would weaken further and that many Japanese firms were in favour of dollar/yen around 95 yen. [ID:nTOE60607E]
He then toned down his call for a weaker yen after a rebuke from the prime minister, saying currency levels should be determined by markets. [nTOE60701F]
But many market players still see Kan as favouring a weaker yen in contrast with his predecessor Fujii, who had spoken publicly of the benefits of a stronger Japanese currency.
Kan said various options are left for the Bank of Japan in guiding monetary policy, and that the government will continue to work with it to support the economy, which he said has not fully recovered.
“The BOJ has a lot of experience and authority (in monetary policy), and I want to work with it while keeping close communication. And I believe we are working well with each other at the moment.” (Editing by Hugh Lawson)