Finance minister Kiichi Miyazawa said Japan's recent yen-selling intervention was a pre-emptive move against an unjustified sharp rise in the yen, rather than a way to make Japan's exports more competitive through a weak yen.

"It was not done with the aim of boosting Japan's economic growth," Miyazawa, apparently mindful of potential criticism over its currency policy, told a regular news conference.

Following the release of stronger-than-expected grossdomestic product (GDP) data earlier this month, there were clear signs that aggressive yen buying may emerge on expectations of a rapid recovery in Japan's economy, he said.

But the finance Minister said the government did not share such market optimism on the economy.

Asked whether the government was seeking to lift Tokyoshare prices by bringing down the yen and as a result staving off deflationary fears, Miyazawa said: "Things may turn out that way as a result, but that is not the aim of our policy."

Miyazawa's comments took a different tone from his vice minister for international affairs, Eisuke Sakakibara, who reiterated that it was acceptable to have a weaker yen if that helps the economy recover.

"Further weakening of the yen is possible if it is necessary for the economy... We are flexible on foreign exchange," Sakakibara told reporters on Monday. "What is of paramount importance is to ensure Japan's economic recovery as soon as possible."

Analysts acknowledged that it would be difficult for the finance minister to admit that Japan was using the currency as a trade tool, adding that Sakakibara was probably the one expressing the true intentions of the government.

Japan's slow economic recovery was singled out by US Treasury Secretary Robert Rubin on Monday, who told CNBC television that the key for Japan wasdomestic demand-led growth, adding: "I don't think any country should use its currency as an instrument of trade policy."

"Miyazawa, being the Minister, cannot say such things (about using the yen), even as a joke," said Yasuhito Kawashima, chief manager of the trading department at Toyo Trust & Banking Corp.

And although the BOJ was absent from the market on Tuesday, its recent aggressive move to drive down the yen has led to speculation it was bracing itself for possible yen-bullish factors down the road.

"The only reason why authorities are so keen to drive the yen lower now is that they know there will be a flow of funds coming into the yen," said Kawashima.

The dollar was quoted around 122 yen in early afternoon trade in Tokyo on Tuesday, after dipping as low as 120.60 yen on Monday before the Bank of Japan launched a new round of dollar-buying intervention in the market.

Some dealers suspect the BOJ may already know that its closely watched "tankan" quarterly corporate survey, due for releaseon July 5, could show an improvement in business sentiment that would spur yen buying.

Underlining such speculation was Tuesday's survey of 100 business leaders by the Financial daily Nihon Keizai Shimbun showing that more than 30 percent said the economy has already or hit bottom or will do so in the April-June quarter.

Other cabinet ministers also weighed in with caution.

Economic Planning Agency Chief Taichi Sakaiya said on Tuesday he could not be too optimistic about prospects for the economy simply on the basis of unexpectedly strong growth in the January-March period, when gross domestic product rose 1.9 per cent from the previous quarter.

Even Prime Minister Keizo Obuchi, who has staked his premiership on an economic recovery, told the Financial Times that Japan's economy would find the current quarter difficult despite the rosy picture painted by the latest GDP data.

"I am not without concerns about the sustainability of the recovery. The current quarter ending in June will, I am sure, betough," he told the paper in London.