Feb. 17 (Bloomberg) -- Japan's Trade Minister Shoichi Nakagawa said sudden rises in the yen's rate against the dollar will have a ``large impact'' on the whole of Japan's economy.

``Sudden rises of the yen against the dollar don't just affect the sectors of the Japanese economy that focus on exports,'' Nakagawa said in an interview with Bloomberg News in Tokyo. ``As the economy hasn't fully found its feet yet,'' sudden gains in the yen ``have a large impact on the economy as a whole.''

The Japanese currency has risen almost 12 percent against the dollar over the past six months, raising concerns that an export- driven recovery of the Japanese economy could stumble. Canon Inc., Toyota Motor Corp. and other exporters' profits are hurt when overseas sales and profits are converted into yen. The Japanese currency traded at 105.66 yen as of 12:45 p.m. in Tokyo from 105.47 late yesterday in New York.

``Volatile exchange rates are good neither for the global economy as a whole or Japan,'' Nakagawa said. ``Healthy fundamentals and purchasing power parity should reflect the state of the economy and the market should decide that.''

Nakagawa also said that it's inappropriate for the foreign exchange market to test the yen's level. He also said that it's important for China's currency, the yuan, to show some flexibility.

To contact the reporter on this story: Lindsay Whipp in Tokyo at Lwhipp1@bloomberg.net

Last Updated: February 16, 2004 22:45 EST