Tokyo: Japan's finance minister warned yesterday that the euro's decline against the yen threatens the Japanese economy and should be carefully monitored, in a sign of increasing frustration with European officials' response to their sovereign debt crisis.

Japan, the United States and China will consider how best to help Europe provided officials there show they will take necessary steps to ease market concerns and increase liq-uidity in the banking system, Finance Minister Jun Azumi said when asked about the agenda for a meeting this week with US Treasury Secretary Timothy Geithner.

Investors pummelled the euro in the first week of the new year, sending it to an 11-year low versus the yen, as worries spread that several European countries will soon struggle to sell and repay government debt.

"The euro's decline could potentially have a big impact on Japan's economy and its exporters," Azumi told reporters after a cabinet meeting.

All-time low

"The level of the euro shows markets are casting a very critical gaze over Europe. It's necessary to watch market moves closely over the long term."

The euro slumped to a 16-month low around $1.2775 (Dh4.69) on Thursday before steadying at $1.2789. Against the yen, it plumbed an 11-year trough of 98.35 yen and hit yet another all-time low against the Australian dollar at A$1.2438.

Italy and Spain will auction government debt this week. Both tenders are seen as the year's first big tests of fragile Eurozone countries' ability to borrow at affordable levels.

Italy, with ten-year bond yields above the seven per cent level widely seen as unsustainable, must pay out ¤100 billion in bond coupons and redemptions in the first four months of 2012 alone.

Azumi's comments on the euro versus the yen do not signal imminent currency intervention, as Japan's past interventions have focused almost exclusively on the dollar/yen rate.

Still, the shift in focus of finance ministry rhetoric is seen as a significant sign of growing concern among the government and Japan-ese industry that Europe's crisis could escalate and derail the global economy.

"Europe is our biggest worry," Toshiyuki Shiga, chief operating officer of Nissan Motor Co, said on Thursday.

"It goes back to the meaning of the birth of the EU... with so many contrasts, so many countries tried to unify... I hope that with this latest currency crisis the EU will once more come together and avoid splitting apart."

Europe's two-year-old sovereign debt crisis, which started when Greece admitted it had misstated its public finances, poses significant risks to the global economy as once red-hot demand from emerging markets is slowing and policymakers in several countries are struggling to find ways to fill the gaps left in external demand.

Intervention

Geithner will visit Japan on January 12 to discuss cooperation on the global economy and a US push to tighten sanctions on Iran over its nuclear ambitions. Geithner is also scheduled to meet Chinese Vice Premier Wang Qishan and Premier Wen Jiabao in Beijing on January 10-11.

Japanese authorities spent a record 9.09 trillion yen on currency intervention in the month to Nov-ember 28 to stop the yen from rising against the dollar and protect its exports.

In a recent report, the US Treasury criticised Japan's solo intervention.

US and Japanese officials could avoid mention of Japan's currency intervention this week as they try to coordinate efforts on the global economy and Iran.