Finance Minister Sadakazu Tanigaki criticized China on Tuesday for trying to weaken its currency by pegging it to the dollar.
He suggested China should raise the value of the yuan given its strong economic growth. Japan's massive yen-weakening interventions in January meanwhile pushed its foreign-exchange reserves to a record $741.25 billion.
"If China does not have a currency system that reflects economic fundamentals in a stable manner, it will not yield positive results to neighboring countries," Tanigaki told the House of Representatives Budget Committee.
Tanigaki attended a weekend meeting of Group of Seven financial leaders in Florida, where participants said "more flexibility" in exchange rates is desirable for major countries or economic areas "that lack such flexibility."
Market players say the phrase is apparently targeted at countries that try to weaken their currencies by either pegging it to the dollar, such as China, or conduct huge dollar-buying interventions to weaken their currencies, like Japan.