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MARSEILLE, France (Reuters) – The yen took a back seat at the Group of Seven finance ministers’ meeting, which grappled with Europe’s debt crisis and global economic slowdown, but Japan said it met little resistance to further intervention.

The G7 economic powers gave a muted reaction to Japan’s call to endorse its right to unilateral action against speculators pushing up its currency, but Japanese officials and some analysts said the subdued response suggests the G7 could let Japan intervene in the market again if needed.

“We intervened in August and I told the (G7) that we will continue to watch the situation closely and flexibly, and take decisive steps against speculative moves,” Finance Minister Jun Azumi told a news conference late on Friday after the G7 talks.

“No countries voiced opinions against our explanation. I believe we gained understanding toward our view on currencies.”

A senior finance ministry official said the G7 had not ruled out the chance of solo intervention by Japan.

In the run-up to the meeting, Japanese officials vowed to seek G7 understanding on Tokyo’s intentions to counter yen rises that threaten to derail a recovery from the March earthquake which tipped the world’s No. 3 economy into recession.

“Japan could not ask for more as it just avoided blunt criticism from other countries against its past intervention,” said Masafumi Yamamoto, Japan chief forex strategist at Barclays Capital in Tokyo.

On Saturday, Azumi told reporters that U.S. Treasury Secretary Timothy Geithner had not voiced opposition in an early morning bilateral meeting.

“He was smiling but did not refute. He appears to understand the situation,” Azumi said.

LITTLE CHANCE OF CONCERTED INTERVENTION

Japan has conducted three currency interventions over the past year — one rare co-ordinated action with the G7 shortly after the March 11 disaster and two solo moves.

Yamamoto said further intervention to curb excess volatility

may not meet international opposition as long as it was not done frequently or aimed at guiding currency rates toward specific levels as Switzerland did this week by setting an exchange cap on its soaring currency.

Japan’s economy is now recovering from recession, while Europe and the United States face a slowdown, so Tokyo has been having a hard time convincing its G7 counterparts of the need for intervention.

European Central Bank President Jean-Claude Trichet said early last month that currency interventions “have to be made on the basis of a multilateral consensus,” signaling displeasure at Japan’s solo action on August 4.

In Marseille, Japanese officials including Bank of Japan Governor Masaaki Shirakawa blamed the yen’s rise on global economic woes that have been amplified by Europe’s debt crisis — the central topic of debate at the G7 talks.

“Such an argument may have discouraged Europe from being critical of Japan’s intervention. As a result, Japan may have gained a free hand in intervening in the currency market,” said Takahide Kiuchi, chief economist at Nomura Securities.

Japan faces higher hurdles persuading the G7 of the need for a joint intervention, which is seen as more effective in curbing excess currency moves.

On Friday, the G7 issued a statement that said exchange rates should be determined by markets and pledged: “We will consult closely in regard to actions in exchange markets and would cooperate as appropriate.”

“The G7 is not in a situation where it needs to do something about currencies as it focuses on how to balance public finances while facing slowing economy,” said Barclay’s Yamamoto.

“The foreign exchange market is reflecting debt problems in the West but it is not causing problems. So G7 must be feeling there’s no use dealing with currencies to resolve the market situation.”

(Editing by Catherine Bremer/Mike Peacock)

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The yen rose against the dollar in Asia Monday as Japan’s prime minister and top central banker limited their dialogue on foreign-exchange matters to a telephone conversation. This lead investors to think that Tokyo may not take immediate action to tame the yen’s recent strength.

Bank of Japan Gov. Masaaki Shirakawa and Prime Minister Naoto Kan on Monday morning discussed recent foreign exchange market movement as well as economic conditions at home and abroad.

A stronger yen is considered negative for the export-reliant economy because it deflates exporters’ profits overseas when repatriated.

As a result, the dollar fell to JPY85.35 as of 0450 GMT, down from JPY85.77 in New York Friday.

The euro, meanwhile, was at JPY108.55 and USD1.2718 from JPY108.71 and USD1.2676 last Friday. Investors said the European unit’s outlook depends on share price moves. If shares decline, the euro should extend losses against its major rivals.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.954 from 83.237 Friday.

The British pound extended its decline against the US dollar as concerns of a faltering global economic recovery boosted safe-haven currencies. Despite positive UK retail sales figures, the sterling continued to be pressured by the probability of further austerity measures implemented by the Bank of England.

The Australian dollar traded lower in Asia Monday after the country’s general election on the weekend left it unclear who will govern, though the currency gained as the session wore on.

Market expectation

Dealers said investors may resume buying the yen actively if share prices deteriorate in Europe and the U.S. later in the day.

European stocks are expected to open higher Monday, managing a positive start after Wall Street closed off its session lows Friday and boosted by the mining sector, which rallied after the Australian general election result at the weekend.

EURCHF is set to test its all-time low of 1.3072 reached in July, though it should find psychological support at around 1.3000, say analysts. This is important support and should hold the currency pair, say technical analysts. If not, the longer-term 100% Fibonacci extension at 1.2997 will probably be reached.

GBP up slightly as short-term-focused investors take advantage of somewhat calm Asian session to square short positions they made recently; Japanese share prices managing to limit losses also a plus for GBP, say dealers. GBPJPY rises to JPY133.15 from JPY132.73, GBPUSD up at USD1.5595 from USD1.5553. Tips GBPJPY resistance at JPY133.30, GBPUSD may raise to USD1.5620. Investors will pay attention to euro-zone August PMI data due later in day for further trading cues; Economists tips headline figure to log 56.7; data due at 0800GMT.

Investors are likely to push the euro down further against the franc, said analysts, testing whether the Swiss central bank will intervene to stem its currency’s strength, as had been the bank’s recent practice.

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Published on Mon, Aug 23 2010, 07:37 GMT

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