The Bank of Japan is continuing to pump funds into money markets with a further injection of 5 trillion yen or 61 billion U.S. dollars. The move is aimed at protecting the nation's banking system and helping banks and other institutions in quake-hit areas to raise necessary funds in the wake of Friday's crippling earthquake and ensuing tsunami. The Bank of Japan conducted emergency operations for the fourth day in a row, bringing its total liquidity injection to 60.6 trillion yen or 739 billion dollars. Meanwhile, the yen has surged to a record high against the dollar, while Japan's Nikkei index has slumped.

The yen soared against the dollar on Thursday in chaotic trading triggered by a worsening situation at a nuclear power plant in Japan.

And stocks tumbled more than 3 percent as investors pulled money out of the country.

In Tokyo morning trade, the dollar was at 79.31 yen, rebounding from the low in illiquid trade as traders covered their short dollar positions and tried to make sense of the moves.

Analysts say that the markets had stabilized and that the yen's rise to a record high against the dollar was very speculative.

Naomi Fink, Japan Equities Strategist for Jefferies, said, "As in recent months, or since the global financial crisis, the pattern that we've seen from the Ministry of Finance is to really step in when they see moves being driven by speculators and not by fundamental repatriation. So I think it's in that instance that the government is going to take action."

Japan's economics ministry reiterated that there was no basis to rumours about repatriation of yen by Japanese insurers following last week's devastating earthquake and tsunami.

It also said Japanese markets have not become destabilised enough to warrant joint G7 currency intervention or government purchases of shares, stressing that the damage from last week's devastating quake to the country's economy would be limited.

Group of Seven finance leaders are expected to hold a conference call this week to discuss the global market fallout from the 9.0-magnitude earthquake that hit northeast Japan last Friday.