Naoto Kan, in office just three months, received a fresh mandate from his Democratic Party of Japan (DPJ) Tuesday when it confirmed him as party president, adding a measure of stability to Japan's turbulent politics.

Most media broadly welcomed Kan's defeat of scandal-tainted party powerbroker Ichiro Ozawa, which should give the premier a free hand for the foreseeable future, with no national Diet or party elections due for two years.

Kan and Ozawa met Wednesday to discuss a reshuffle of the cabinet and party posts that is expected before the end of the week.

Media commentators warned that the centre-left leader, after the distraction of the party election campaign, must now quickly tackle a series of pressing challenges on both the economic and diplomatic fronts.

On his first day after the bruising leadership showdown, Kan's government moved quickly to tackle the yen's rise to a fresh 15-year high, intervening in currency markets for the first time since 2004.

The yen's recent surge has threatened Japan's spluttering recovery by hurting exports, eating away at companies' repatriated overseas earnings, and worsening already entrenched deflation by making imports cheaper.

The first intervention -- estimated by traders as a sale of one trillion yen (11.7 billion dollars), according to Dow Jones Newswires -- drove the yen back to as low as 85.45 against the dollar from 82.86 earlier in the day.

Japan later extended its intervention into European trading and was prepared to act in the US market, reports said.

Speaking in the evening, Kan said the yen had "reached the stage where we could not leave it untouched. So, we intervened". The premier vowed to keep a close watch on currency markets, media reports said.

But while the Kan government moved to tackle its currency woes, a diplomatic stand-off with rival China deepened.

China said it had summoned Japan's ambassador a fifth time to demand Tokyo release a Chinese fishing boat captain arrested after a collision between his boat and two Japanese coastguard vessels last week.

Japan says captain Zhan Qixiong rammed the Japanese patrol vessels intentionally near a disputed island chain in the East China Sea, which is claimed by both countries as well as Taiwan.

The September 7 incident has badly strained relations between the two regional heavyweights and led Beijing to postpone planned talks with Tokyo on joint energy exploration in the East China Sea.

The United States called Tuesday for talks to settle the dispute.

"On this narrow issue, we hope that would be resolved peacefully through dialogue between China and Japan," said a State Department spokesman.

Former US deputy secretary of state Richard Armitage, after meeting Japanese officials Wednesday, said China is "testing to see what they can get away with" at a time when it sees Tokyo-Washington ties as chilled by a base dispute.

The United States and Japan, security allies for half a century, have argued for much of the past year about the fate of a locally unpopular US airbase on Okinawa island, an issue that has not yet been fully resolved.

Kan, not known as a foreign policy expert, will meet world leaders, including US President Barack Obama, when he heads to New York next week for the UN General Assembly meeting.

Amid the current tensions, Kan may however not hold a summit with Chinese Premier Wen Jiabao, Jiji Press reported in Tokyo.

"We don't have to be forced to hold talks in such a situation," an unnamed Japanese government source was quoted as saying by Jiji. "We had better have a cooling-off period."

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