ISTANBUL (Bloomberg) - Japanese Finance Minister Hirohisa Fujii issued his clearest warning yet that his nation is open to intervening in the currency market even as the Group of Seven (G-7) declined to criticise the tumbling dollar.

"If currencies show some excessive moves in a biased direction, we will take action," Mr. Fujii said on October 3 in Istanbul after a meeting of G-7 finance ministers and central bankers. He declined to say if the yen is now trading in such a way.

Mr. Fujii's position has shifted since his initial remarks on taking office last month, when he opposed seeking a "weak" yen and selling the currency which last week rose to an eight-month high of 88.24 against the dollar. The gain is threatening the profits of exporters from Canon Inc. to Toyota Motor Corp.

The change in stance reflects a slide in the dollar that has sparked concern from Canada to France over the potential impact on economic recoveries. While the G-7 stopped short of issuing a specific call for a stronger US currency, Mr. Fujii's language raises the risk of the first currency-market action by a G-7 nation since 2004.

"Japan is thinking more about the currency's effect on the real economy, and if necessary they'll intervene," Gerard Lyons, the London-based chief economist of Standard Chartered Bank, said in Istanbul. "For now they seem to want to talk it down, but eventually they'll have to do something about it."

Mr. Fujii, 77, said last month he opposed stepping into the foreign-exchange market in principle, before revising that comment to say he wasn't an advocate of a strong currency and that Japan was open to acting should the market move "abnormally". Mr. Fujii said in Istanbul that his early comments about the yen "have been a bit misunderstood", and that currencies should be set by markets.

Mr. Fujii is confusing traders and likely still wants the yen to gain as the ruling Democratic Party of Japan, which won power in August, tries to refocus the economy toward domestic demand and away from exports, said Stephen Jen, a managing director at BlueGold Capital Management LLP in London.

"I doubt Finance Minister Fujii will materially change his stance until Japan is pushed deep into recession," Mr. Jen said.

Japan has not entered the foreign exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($164 billion) in the first quarter of 2004 to restrain the currency. In his first tenure as finance chief, from August 1993 until June 1994, Fujii oversaw more than 1.3 trillion yen ($15 billion) of yen sales. The G-7 has not intervened as a group since September 2000.

The yen's appreciation threatens to undermine Japan's export-driven economic recovery as the jobless rate hovers near a record high and deflation continues. Tokyo-based Canon, the country's biggest maker of office equipment, estimates every one yen appreciation against the dollar will lower its second-half operating profit by 4.2 billion yen.

The "current level around 90 yen is a bit painful", Yukitoshi Funo, executive vice-president of Toyota City-based Toyota, the world's largest seller of hybrid autos, said on September 25. "I think the yen should be a little weaker."

Mr. Fujii struck a different tone than his G-7 colleagues, who repeated that "excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability".

That means further declines in the dollar are likely, said Sophia Drossos, co-head for global foreign exchange strategy at Morgan Stanley in New York. In April 2008, the G-7 spoke out against a declining dollar by complaining about "sharp fluctuations in major currencies".