Japan moves to combat rising yen
Japan's leading shares rose as much as 3% after authorities intervened in the currency markets to weaken the value of the yen against the dollar.
The central bank stepped in to sell yen and buy dollars, a day after the yen hit a 15-year high against the dollar.
It is the first time in six years that the Bank of Japan has intervened, and further action has not been ruled out.
A strong yen makes Japanese exports more expensive, and reduces profits when earnings are repatriated.
The dollar was up 3.1% to 85.63 yen, on track for its biggest daily gain in nearly two years. The euro was also up 2.9% at 111.10 yen.
Currency strategists suggested this was a sign of the move's initial success, but cautioned about making early judgements.
Japan did not reveal the size of the intervention, but analysts suggested its authorities could have sold as much as 1 trillion yen ($11bn; £7.5bn), one of the largest amounts it has spent in a single day.
Investors welcomed the intervention, sending Japan's Nikkei share index up by 2.9% at first, with the index eventually closing 2.3% higher at 9,516.56.
The yen had spiked after news filtered through that Prime Minister Naoto Kan had survived a leadership challenge from rival Ichiro Ozawa.
Traders had reckoned Mr Kan would be less likely than Mr Ozawa to take measures to weaken the yen.
But in a brief news conference, Finance Minister Yoshihiko Noda said: "We have conducted an intervention in order to suppress excessive fluctuations in the currency market.
"We will closely monitor currency developments, and take firm action including intervention.
"Our country's economy is still in a very severe situation with continued deflation," he added.
The yen's rapid appreciation "harms the stability of the economy and finances. We cannot tolerate it."
Japanese exporters praised the intervention.
"From the standpoint of aiding the competitiveness of Japan's manufacturing industry, we applaud the move by the government and the Bank of Japan to correct the yen's strength," carmaker Honda said in a statement.
Honda's shares closed up 4%, while Sony, another big exporter, ended 4.2% higher.
Toyota has estimated that every one-yen rise versus the dollar reduces earnings by about 30bn yen.
A recent government survey suggested many companies were considering moving production overseas if the yen stayed high.
Despite broad support for the intervention, there were doubts about its lasting impact without action by other central banks.
"The effect from Japan's solo intervention won't last very long. We have to see how the US and European monetary authorities react," said Yuji Kameoka, chief forex strategist at Daiwa Institute.
When asked about the currency intervention, Jean-Claude Juncker, chairman of the Eurogroup said: "Unilateral actions are not the appropriate way to deal with global imbalances."
Others also stressed the importance of support from Japan's fellow G7 members, as Japan's last major intervention into the markets in 2004 met with critical comments from the then-US Federal Reserve chairman Alan Greenspan.
If repeated, currency strategist Simon Derrick said, "not only would this prove embarrassing, such criticism would run the risk of also undoing the work that they had already done".
The record low for the dollar is 79.75 yen, reached in April 1995.