TOKYO, Jan 23 (Reuters) - Japan's Finance Minister stepped up his warnings about volatility in financial markets on Friday, saying the government would act promptly if necessary, though he stopped short of saying Tokyo would intervene in currency markets.
The yen soared to a 13 1/2-year high of 87.10 to the dollar earlier this week, hurting Japanese exporters' profit outlooks and bringing down their share prices.
"We are watching financial markets very carefully and with a high sense of alert, and if necessary we must take prompt action in a broad sense," Finance Minister Shoichi Nakagawa told a news conference.
Nakagawa said the Japanese government must take appropriate steps to bolster the economy, a day after the country's central bank forecast that the economy would plunge into its deepest economic contraction in modern times.
Japan's exports and industrial production have been tumbling at an unprecedented pace in the last few months as global demand evaporated.
"This is not a problem for Japan alone like in the 1990s. The economic malaise in the United States and Europe is affecting the Japanese economy. I think that's also playing a big role in currency markets and share prices," Nakagawa said.
"So I hope that the U.S. and European authorities will take measures to deal with it. And Japan will also do what it must do," he added.
The Nikkei share average fell to a two-month low after a massive loss warning from Sony Corp exacerbated concerns about corporate earnings and data showed further deterioration in the U.S. economy.
Nakagawa also said he hoped Japanese regional banks would apply for public funds to boost their capital so that they can expand lending.
Two regional lenders have showed an interest in asking for capital injections from the government. (Reporting by Hideyuki Sano; Editing by Hugh Lawson)