Japan on Thursday took steps to weaken the yen in an effort to help safeguard the nation's post-quake recovery after the unit's recent surge towards a post-war high.
The government intervened unilaterally in currency markets to counter "one-sided" and "excessive" speculator-driven movements in the yen that it said threatened Japan's recovery from the March 11 earthquake and tsunami.
"If the moves continue, it could negatively impact the Japanese economy and financial stability when Japan is making various efforts to reconstruct itself following the impact of the disaster," Finance Minister Yoshihiko Noda said.
"Therefore we carried out currency intervention. Now we will watch market movements closely." Officials declined to comment on the size of the intervention.
The Bank of Japan announced further efforts to spur the economy in coordination with the government's moves, expanding a programme to purchase assets and boost liquidity by 10 trillion yen to 50 trillion ($638 billion).
Japan's first currency intervention since March saw the yen fall sharply from just after 0100 GMT, and by 0940 GMT the dollar was testing the 80 yen level from 76.99 yen earlier in the day.
The Japanese unit also fell against the euro, with the single currency fetching 113.73 yen from an earlier 110.45.
The move also came after the Swiss central bank lowered its key rate and boosted liquidity Wednesday to stem the rise of the franc, also regarded as a "safe haven" for investors.
Noda said the government was not aiming to guide the yen to any specific level, but the yen-selling operation appeared to be continuing during London trading hours.
The impact of the March earthquake and tsunami plunged Japan's economy into recession, but as the nation's companies have scrambled to restore supply chains, output levels have begun to rise again.
However, that recovery has been overshadowed by a soaring yen that threatens the post-disaster rebound of exporters.
A strong yen erodes repatriated earnings and makes it harder for companies to make money on products made in Japan and sold overseas, prompting firms to speed up a shift towards more production abroad.
But analysts have questioned how effective Thursday's intervention will be in the longer term, given that the yen's strength has been due to continued weakness in currencies such as the dollar and the euro amid fears for the US and Eurozone economies.
A deal to raise the US debt ceiling and avoid a calamitous default this week failed to relieve the recent pressure on the greenback, with investors focused on evidence of a weakening US economy and the threat of a downgrade.
"It is hard to see the move higher in the (yen-dollar) pair as anything more than temporary," amid clear signs of the US economy slowing, IG Markets said in a client note.
apan's last intervention in March with its G7 counterparts -- after the yen hit a post-war high of 76.25 to the dollar following the earthquake -- helped push it to as low as 85 to the dollar in April, but it has since strengthened.
Thursday's intervention was Japan's first unilateral move since September 2010. Analysts said authorities would likely continue to sell the yen throughout the day.
Officials had in recent days raised their rhetoric against the surging currency in a bid to cool it with the threat of intervention.
Noda on Tuesday said the yen was "overvalued", while Bank of Japan governor Masaaki Shirakawa on Wednesday warned of its impact on exporters.
"The market was braced for the move after Bank of Japan officials voiced concern that the higher yen would lead to a deterioration in the sentiment of Japanese firms," said an analyst at a Japanese bank.
"The authorities needed to surprise the market to maximise the impact of the intervention," the analyst said, adding that the move was timed to occur ahead of the release of a key US employment report on Friday.
Japan's actions to weaken the unit helped buoy Tokyo shares but earlier gains faded as the Nikkei index closed just 0.23 percent higher.