3RD LD: Japan to take action if yen rate 'too one-sided': Fujii.

ISTANBUL, Oct. 4 Kyodo

(EDS: CLARIFYING 7TH GRAF)

Finance Minister Hirohisa Fujii said Saturday the Japanese government will take action if the yen's value becomes ''too one-sided'' in the foreign exchange market, saying stability in the market is desirable for all countries.

''We will take appropriate action if foreign exchange rates become too one-sided,'' he said at a press conference after a meeting of Group of Seven financial chiefs in Istanbul.

His comments suggest Japan's new government, led by the Democratic Party of Japan, is not ruling out the possibility of intervening in the currency market if the yen rises relative to the U.S. dollar in a way deemed excessive.

Fujii reiterated his position on the currency issue after the G-7 in the Turkish city agreed to collaborate on ensuring stability in the currency market amid the dollar's recent fall against the yen and euro.

But at the same time, Fujii said he told the G-7 meeting he is opposed to competitive currency devaluation, saying, ''There should not be policies to competitively devalue one's currency'' to boost exports.

Market participants have shown a strong appetite for the Japanese currency partly because Fujii has made a number of remarks on currency issues since becoming Japan's finance minister Sept. 16, including some taken to suggest a reluctance to step into the foreign exchange market to weaken the yen.

The dollar hit a nine-month local low at the lower 88 yen level in Tokyo in late September after Fujii said Japan would ''in principle'' not intervene in the currency market. The minister later adjusted his stance and said he was not an advocate of a strong yen.

As for the domestic economy, Fujii warned against optimism.

''It has been said that the Japanese economy has started to see some bright spots, but it is still in a very serious condition,'' he said.

Fujii said he told his G-7 counterparts that Japan's new government emphasizes boosting domestic demand to revive the country's economy.

Bank of Japan Governor Masaaki Shirakawa told at the same press conference the central bank will do its utmost in its capacity to support the economy by ''tenaciously'' maintaining a loose monetary policy.

But as for the bank's temporary measure of buying corporate debt to support corporate financing, Shirakawa indicated there is a receding need to continue the emergency step.

''Companies' fundraising conditions have steadily improved, and the risk of financial matters hurting the real economy is largely receding,'' Shirakawa said.

The BOJ is due to decide on whether to terminate its temporary measure of buying corporate debt from banks and providing them with unlimited low-interest loans beyond the scheduled expiration of the measures at year-end.