'Whether it is the stock market or foreign exchange, sudden and extreme changes are not welcomed', Mr Nakagawa told a press conference.

'Within our authority, we must take stern measures to counter sudden and extreme moves', he said.

Leaders of Japan, which heavily relies on exports for growth, have expressed worries over the strength of the yen, which makes their products less competitive overseas and cuts into earnings.

The Japanese government has in the past intervened in the market, particularly to support the US dollar against a rising yen.

However, Japan's monetary authorities have not intervened in the foreign exchange market since March 2004, allowing the local currency to find its own level against the greenback.

The government has also used the public pension fund in the past to buy Japanese stocks when the market fell significantly.

Tokyo's Nikkei stock index sank to a 26-year low in October while the US dollar sank to a 13-year low against the yen, but some calm has since returned to Japanese markets, helped by governments steps to ease a credit crunch.

Mr Nakagawa said the fortunes of Japanese markets were closely linked to overseas developments.

'If stocks fall somewhere in the world, the effect goes around the globe. When they fall, they fall easily. But it is difficult to see upward moves', he said. -- AFP