Japanese Finance Minister Taro Aso on Friday warned China against frequent manipulation of yuan rates, saying that Tokyo would face a tough decision on how to respond to any such interventions from Beijing.
Aso urged China to continue shifting its currency market towards a market-oriented system.
In a move that shook global financial markets, China last week devalued the yuan by nearly 2 percent. The action, coming on top of a slew of gloomy data including soft exports and slumping wholesale prices, heightened concern over the strength of the world's second-largest economy.
Aso said Japan welcomes the move if it was part of Beijing's efforts to make its currency system a market-based one. But he warned that Japan was on guard against any attempts by China to manipulate the yuan to give its exports a competitive advantage.
"Japan would face a tough decision on how to respond if China intervenes frequently in the market," he told a news conference after a regular cabinet meeting.