Japan intervened in the foreign exchange market for the first time since 2004 after a surge in the yen to the strongest against the dollar in 15 years threatened to stunt the nation's economic recovery.
Finance minister Yoshihiko Noda told reporters in Tokyo that yen sales were unilateral.
Chief cabinet secretary Yoshito Sengoku said the ministry "seems to think" 82 yen per dollar to be the line of defense, after it reached 82.88 earlier today.
Prime minister Naoto Kan was under pressure to intervene after business leaders' calls for steps to arrest the yen's gains, which undermine the exports propelling Japan's growth.
The yen tumbled past 85 per dollar for the first time in almost two weeks, before trading at 84.87 per dollar as of 2.25pm in Tokyo. The currency had climbed more than 11 per cent against the dollar from mid-May through yesterday, reaching a high of 82.88 earlier today.
The benchmark Nikkei 225 Stock Average jumped 2.6 per cent to 9,543.75.
Japan's currency has rallied amid concern about the durability of the US recovery and the effect of Europe's debt woes. The yen typically gains when investors avoid risk because of the country's current-account surplus and deflation. Authorities decided to intervene today because the yen's climb yesterday and overnight was due to traders' views that Kan wouldn't take such a step, according to one trader.
Firms said they remain profitable as long as the yen trades at 92.90 per dollar or weaker, according to the Cabinet Office's annual report released in February.
US Treasury spokeswoman Natalie Wyeth declined to comment on Japan's announcement when reached by telephone.
China's ministry of commerce also declined to comment. China has limited gains of its own currency to less than 2 per cent since ending a two-year peg to the dollar in June. US lawmakers have criticised China's currency policy for providing a subsidy to the nation's exporters. The House Ways and Means Committee is scheduled to hold a hearing on the subject today in Washington.
Japan hadn't intervened to sell yen in the foreign-exchange market since 2004, when the yen was around 109 per dollar. The Bank of Japan, acting on behest of the Ministry of Finance, sold 14.8 trillion yen in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.
Bank of Japan Governor Masaaki Shirakawa said in a statement that the action should "contribute to a stable foreign exchange-rate formation."
Until now, the government has pressed the Bank of Japan to step up liquidity injections to help address the gains in the yen. The central bank last month increased a credit program by 10 trillion yen ($119 billion) after an emergency meeting. The step had little impact on the currency.
Top business executives have been calling for government action to stem the yen's rise. "We want verbal or actual intervention if the yen appreciates more than the current level," Hiromasa Yonekura, head of Japan's Keidanren business lobby, said at a press conference on Monday.
"Rapid change should be managed," Hiroaki Nakanishi, president of Hitachi, said this week in Tokyo.
Some analysts have said that official action by Japan might not weaken the yen for long unless it's conducted together with overseas authorities.
The government yesterday revised its July industrial output figures to show that output fell rather than increased from a month earlier. Japan's economy expanded at a 1.5 per cent annual rate in the second quarter, less than half the pace of the previous period, and consumer confidence slid to a four- month low in August.
Bloomberg