Financial markets greeted Japanese Prime Minister Ryutaro Hashimoto's announcement of fresh tax cuts with a thumbs-down, but officials defended his decision, saying Tokyo had done what was needed.

A senior Ministry of Finance (MOF) official said the Japanese economy was unlikely to be a key issue at next week's Group of Seven (G7) meeting in Washington, because Japan has already announced steps to stimulate its economy.

"Since Japan has responded to requests from G7 nations (on its economic steps), I don't think there will be any further discussion about Japan's policies at the G7 meeting," the official said.

"We have done whatever is necessary, I think," Japan's top financial diplomat, Mr Eisuke Sakakibara, said earlier.

But the markets did not think Tokyo had delivered. Tokyo shares were down more than 1.5 per cent at one point yesterday while intervention by the Bank of Japan (BOJ) was required to keep the yen from falling against the dollar.

The dollar had risen above 133 yen on Thursday after Mr Hashimoto's announcement, forcing the BOJ to make a rare intervention in New York.

Although the overnight BOJ action briefly pushed the dollar below 130 yen, dealers described BOJ support of the yen yesterday as "hectic" and "persistent".

"We have plenty of ammunition, so we would shoot whenever necessary," one official said. Mr Sakakibara, vice finance minister said he thought the yen would strengthen.