TOKYO: Japanese Prime Minister Naoto Kan said Thursday that Japan would take decisive steps in currency markets "if it`s necessary in the future," a day after intervening to stem the strength of the yen.

"We are determined not to allow the drastic fluctuation of the yen," Kan told a business conference in Tokyo, in comments that indicate Japan is prepared to intervene again.

Japan on Wednesday stepped into the currency markets for the first time since 2004 in a bid to stem the yen`s appreciation against the dollar and help safeguard a faltering recovery.

The yen was trading at 85.60 to the dollar in Tokyo morning trade, from 85.72 in New York late Wednesday.

The move came a day after Kan reaffirmed his leadership in a ruling party election victory over Ichiro Ozawa, a heavyweight political rival seen as more likely than Kan to take firm action.

However, officials in Europe and the United States criticised Japan`s unilateral move Wednesday.

Analysts say other central banks now have a stronger argument to weaken their currencies and boost the competitiveness of their export sectors, complicating efforts to encourage China to further loosen its currency.

"China is not the only country with a predatory exchange rate policy," said Democratic Representative Sander Levin, who chairs the powerful House Ways and Means Committee that has power over taxes and trade policy.

Analysts also question how effective Japan`s actions will be in the long term, given global moves to keep domestic currencies weak and continuing expectations for further monetary easing in the US.

BDST: 0848 HRS, September 16, 2010