Chief Cabinet Secretary Shinzo Abe said Monday that financial markets should “reflect Japanese economic fundamentals,” in response to the yen’s surge against the dollar and declines by Tokyo stocks in the morning.

“We consider it desirable that (the markets) reflect Japanese economic fundamentals, but in any case, the economy’s recovery trend has not changed,” Abe said at a news conference.

The government’s top spokesman said the resolve to advance reforms remains intact, alluding to the ruling Liberal Democratic Party’s defeat in Sunday’s House of Representatives by-election in the Chiba No. 7 district.

On the Tokyo bourse, the benchmark Nikkei stock index fell at one point below the 17,000 line for the first time in about a week, due in part to rising political uncertainty after the by-election loss for the LDP, which Koizumi heads.

The dollar, meanwhile, temporarily hit an eight-week low below the mid-115 yen line Monday morning in Tokyo, after the Group of Seven financial chiefs called for China to ensure greater exchange rate flexibility.

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