Major industrial nations set the stage over the weekend for curbing the high-flying yen, which they fear could damage the entire world, after winning a long-sought pledge from Japan to inflate its frail economy.

The accord reached by finance ministers and central bankers from the Group of Seven nations at their regular autumn meeting marked a major turning point in what had become an increasingly desperate battle by Japan to win support for its efforts to arrest the yen's dangerously fast rise against the dollar.

The much-needed reprieve for Japan boiled down to a single word in the group's delicately-phrased statement. In a rare direct reference to a specific currency, the group expressed its "concern" about the yen's appreciation.

That wording was unusually blunt for a G7 statement, and is likely to prompt financial markets to put pressure on the yen's value when currency traders return to their desks this morning. `It's a pleasant surprise that the Japanese were able to get as much a statement of concern out of the G7 as they did," said Mr Adam Posen, a Japan specialist at the Institute for International Economics think-tank.

"Japan made all the right noises not only about fiscal stimulus, but perhaps also about additional liquidity, which is exactly what the United States wanted."

The yen's 15 per cent-plus ascent since June on the back of unexpectedly strong Japanese growth figures has set off alarm bells in Tokyo and far beyond amid fears the currency's rise could dampen Japanese exporters' profits and put a lid on the nascent recovery in the world's second-largest economy.

Japan has unsuccessfully tried to arrest the yen's rise by selling it in the open market, and had appealed to its G7 partners for a concerted yen-selling effort. But strong and sustained opposition from Washington in particular had all but eliminated that option even before the G7 meeting started.

Instead, Japan's G7 partners demanded a promise from Tokyo that it will come up with new spending programmes and relax its already loose monetary policy further - a tricky proposition since Japan's key interest rates already are at zero per cent.

After a day of intense talks, the G7 got what it wanted from Japan. But while Tokyo's promise was a significant step forward for the G7, it was no more than that - a promise.

The US Treasury Secretary, Mr Lawrence Summers, declined to go beyond the group's statement. But he offered a note of caution when asked during a news briefing whether he felt his message had got through to Tokyo. "With respect to Japanese policy, I would encourage you to follow closely the statements of the Japanese authorities," he said.

With the ball firmly in Japan's court, markets will be watching whether its Finance Minister, Mr Kiichi Miyazawa, and Bank of Japan governor, Mr Masaru Hayami, will follow through on their joint pledge. But relations between the two are frayed after Mr Hayami last week refused to relax monetary policy further, defying universal pressure from his own government and abroad to do so.

Mr Hayami, who has been eager to prove his bank's recently-won independence, appeared to be in a more conciliatory mood after the G7 meeting, telling reporters the bank was "prepared to respond appropriately and in a timely way to developments in the economy and financial markets, including foreign exchange". However, Mr Hayami stopped short of saying the central bank would set specific targets for raising the economy's money supply, something many economists had called for as an easy way of boosting liquidity and raising domestic demand in Japan.

Nevertheless, US and European officials who had become deeply worried over the yen's rise were clearly pleased with the talks outcome. For his part, Mr Miyazawa also seemed happy with what he got, describing the G7 accord as "well written".

"I'm surprised the Japanese are as happy as they are," said Mr Posen. "They must have gone in with very low expectations."