* Japan wants joint G7 message to China next month
* Canada agrees to put issue on G7 agenda in Iqaluit
* Recent China moves stoke expectation of more flexibility (Updates with Canadian finance minister)
HONG KONG, Jan 20 (Reuters) - Japan supports sending a "collective message" to China at a G7 meeting next month to allow more flexibility in the yuan, a government official said on Wednesday.
China has come under heavy pressure from the Group of Seven leading industrialized nations to revalue its currency, which some economists say is kept artificially low, giving it a unfair export advantage and hindering more balanced economic growth.
Canadian Finance Minister Jim Flaherty, who will chair the meeting of G7 finance ministers and central bank governors in Iqaluit, in Canada's Far North, Feb. 5-6, said on Wednesday he had agreed to Japan's request to discuss the China issue at the meeting but he did not say whether he supported issuing a joint message. The G7 will not issue a communique. [ID:nN20136837]
The remarks by Rintaro Tamaki, Japan's vice minister of
finance for international affairs, echoed concerns expressed by
Flaherty and senior Canadian officials who have said they would
like to see the yuan move more freely
"It's a collective message to China," Tamaki said on the sidelines of the Asian Financial Forum in Hong Kong when asked about the response to China over the yuan.
Flaherty, stressing that the G7 meeting will be less formal than usual, has been outspoken on the need for a more flexible yuan.
"It is a concern when people ask about the weakness in the American dollar, one has to look at the fact that some of the Asian currencies, including the Chinese currency, are artificially constrained," he said.
Tamaki's remarks had little impact on financial markets but offered additional evidence that Japan stands with other G7 members to press China on the issue, one trader in Tokyo said.
China has continually shrugged off pressure from its major trading partners to let the yuan appreciate, repeating its line that stability was in everybody's best interests.
Reform of China's exchange rate policy will be gradual as exports will likely to take a long time to return to pre-crisis levels, the country's commerce minister said on Tuesday.
The disagreement has highlighted the failure of big countries to resolve currency tensions that were thrown into focus by the global economic crisis, despite calls at a summit meeting last September for those issues to be tackled.
However, moves by China's central bank this month to tighten liquidity and cool rapid economic growth have stoked expectations that Beijing may allow the yuan to appreciate before too long. [ID:nTOE60J010]
Tamaki also said that increased regulation of banks in Japan was a concern, but that regulators had not worked out what the impact on the industry would be. (Reporting by Joseph Chaney in Hong Kong, David Bailey in Windsor, Ontario, and Louise Egan in Ottawa; editing by Peter Galloway)