Global finance ministers have expressed concern at the “extreme volatility” of the yen, as the Japanese currency remained near 13-year highs on Monday.

The comments came from heads of the Group of Seven (G7) leading industrialised nations, but they stopped short of prescribing action.

The yen’s rise continued to hit Japanese stocks, with the Nikkei index closing at a 26-year low on Monday.

Japan’s government said it would now move to shore up the share market.

The yen hit a rate of 91.93 yen against the dollar on Monday. On Friday it had touched 90.90 yen against the dollar, its highest level since 1995.

Global co-operation

The G7 leaders commented on the high value of the yen in a joint statement issued after talks in Tokyo.

They said they would co-operate as appropriate to bring stability to battered global markets, but did not give any specific details of how they hoped to lower the yen’s value.

The yen’s rise has concerned Japanese investors, who are worried about its impact on the country’s main exporters, as it makes their products more expensive overseas.

As a result, Japan’s main stock index, the Nikkei, fell on Monday to close at its lowest level since 1982.

‘Tighter controls’

Prime Minister Taro Aso said Tokyo would move to introduce tighter controls on the short selling of stocks, and also pledged increased bail-outs for the country’s banks.

Short selling occurs when an investor borrows company stock owned by another investor, then sells the shares in the market, hoping the price will fall.

If the price does fall, they then buy the shares back at the lower price, pocketing the difference.

Other nations, such as the UK, have already moved to put a temporary ban on short selling in financial stocks.

Japan’s Finance Minister Shoichi Nakagawa added that he would “continue to watch currency markets with great interest”.

The rise in the value of the yen is being driven by two main factors.

Firstly, like the US dollar, it is seen as a haven buy in uncertain times.

Secondly, the yen has risen as a result of the end of the yen carry trade, in which traders used the yen to buy currencies with higher interest rates.

The yen carry trade has been unwinding due to the difference between Japanese rates and those elsewhere in the world narrowing.

This means that traders have pulled out of investments in countries such as Hungary and Iceland, buying back the yen in the process.

News reported by The BBC

Finance ministers from leading industrialised nations have pledged action to tackle the financial crisis.

The G7 nations issued a five-point plan of “decisive action” to unfreeze credit markets, after a meeting in Washington.

Widespread fears of a global recession caused Asian, European and US markets to tumble on Friday despite rate cuts and cash injections by central banks.

The US also said it would invest directly in banks for the first time since the 1930s, following a UK move.

As well as the Washington meeting of the G7 – which comprises the US, Japan, Britain, Germany, France, Italy and Canada – the International Monetary Fund (IMF) will hold talks in the US capital over the weekend.

Leaders of the eurozone countries are also scheduled to meet in Paris on Sunday.

‘Protect savers’

After Friday’s G7 meeting, US Treasury Secretary Henry Paulson said the group had a clear vision of what needed doing, and was working together to stabilise the world’s panic-stricken money markets.

Henry Paulson says “it is critical for governments to provide much needed liquidity”

“We are squarely focused on the immediate need to stabilise our financial market and recognise that investor confidence is critical to restore liquidity and enhance the stability of our financial system,” he said.

The five-point plan is intended to protect major banks and financial institutions from failure and ensure they can raise capital from public and private sources.

It includes steps to unfreeze the flow of credit and protect savers, although it did not reveal any specific measures.

It pledged to take “decisive action and use all available tools” to support financial institutions.

It also vowed to take all necessary steps to unfreeze credit and money markets; ensure banks can raise capital from public as well as private sources; and ensure national deposit insurance and guarantee programs are robust.

Mr Paulson said the US was working closely with China and Japan – both of which hold large amounts of US treasury bonds – to resolve the crisis.

He added that the US government would buy bank equity.

“We’re going to do it as soon as we can do it and do it effectively,” Mr Paulson said.

On Wednesday, the UK announced it would set aside £50bn to buy shares in the nation’s banks.

While the G7 statement identifies the main areas requiring urgent attention, it is short on detail, says the BBC’s Andrew Walker in Washington, adding that much will now depend on how each government takes its own plans forward.

Panic-stricken markets

Earlier on Friday, US President George W Bush said his government would continue to act to resolve the crisis.

Speaking on the White House lawn, Mr Bush said the recent market turmoil was being driven by “uncertainty and fear”.

But he said the US authorities had a comprehensive strategy and a wide range of tools that they were using “aggressively” to fix the problems.

“We’re in this together and we’ll come through this together” President Bush

Mr Bush defended last week’s rescue package, saying it was big enough, but stressing it would take time to have its full impact.

But volatile market conditions continued despite moves on Wednesday by six of the main central banks to cut interest rates by 0.5% and a separate move by China’s central bank to cut rates by 0.27%.

Wall Street has lost a fifth of its value in the past 10 trading days, suffering one of its biggest weekly falls since the Dow Jones index was created 112 years ago.

Markets in France, Germany and Britain plunged to end Friday between seven and nine percent lower.

Shares in Asia also closed down sharply, with Japan’s main Nikkei index suffering its biggest one-day drop since the 1987 stock market crash.

As panic mounted, there were trading suspensions in several countries including Russia, Austria, Iceland, Romania, Ukraine, Brazil and Indonesia.

Amid the gloom, the British pound tumbled to a five-year low against the US dollar and oil prices plummeted to a one-year low.

News reported by The BBC