The Japanese government intervened in foreign exchange markets yesterday to weaken the yen, after a crucial survey of business sentiment provided further signs the economy is recovering slightly.

The Bank of Japan aggressively bought dollars in an apparent attempt to prevent the yen strengthening above Y122 to the dollar, traders said.

The yen finally closed at 122.6 against the dollar in Tokyo, about Y1 weaker than at the start of the day. In London it closed at Y122.3 against the dollar. The bank did not reveal the scale of its intervention. However, Koji Tanami, vice-minister of finance, said the dollar buying was intended to bolster the economy and guard against a premature rise in the yen.

The bank has intervened repeatedly in recent weeks to weaken the Japanese currency, amid fears that the yen could surge as a result of the recent upturn in the Japanese stock market.

However, the bank's stance is being watched closely by the markets for clues about the government's policy stance. And the government is expected to take further measures in the coming months to support growth.