By Makiko Yamazaki and Leika Kihara
TOKYO, Dec 23 (Reuters) - Japan has a free hand in dealing with excessive moves in the yen, Finance Minister Satsuki Katayama said on Tuesday, issuing the strongest warning to date on Tokyo's readiness to intervene in the currency market to arrest sharp declines in the currency.
"They are speculative and absolutely do not reflect fundamentals," Katayama told a news conference on the yen's declines after Bank of Japan Governor Kazuo Ueda's news conference last week.
"The government will take appropriate action against excessive moves," based on Japan's agreement with the U.S. in September on exchange-rate policy, she said.
The remarks mostly echo those she made in an interview with Bloomberg on Monday.
The yen rose to 156.36 per U.S. dollar on Katayama's remarks on Tuesday, though it remained close to the 11-month low of 157.78 touched on Friday.
In a joint statement issued in September, Japan and the U.S. reaffirmed their commitment to "market-determined" currency rates, while agreeing that foreign exchange interventions should be reserved for combating excess volatility.
Japanese policymakers have cited the statement as giving them the right to intervene when yen moves deviate from economic fundamentals and make excessively big swings.
A weak yen has become a source of headache for Japanese policymakers as it pushes up import prices and broader inflation, thereby increasing households' cost of living.
Tuesday's remarks contrasted with those Katayama made on Monday, when she said Japan will take appropriate action but did not define recent yen moves as out of line with fundamentals.
The BOJ raised interest rates to 0.75% on Friday, taking them to levels unseen in 30 years in another landmark step in ending decades of huge monetary support.
While the move helped narrow the interest rate gap with the U.S., the yen fell as markets interpreted comments from Ueda's post-meeting press conference as signaling the BOJ was in no rush to raise rates further.
(Reporting by Makiko Yamazaki and Leika Kihara; Editing by Sam Holmes, Michael Perry and Shri Navaratnam)
