By Chikako Mogi
TOKYO (Reuters) - Asian shares inched higher on Wednesday while the yen was firmer amid conflicting interpretations of G7 comments about the yen's recent weakness.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent, pulled higher by Australian shares which jumped 1 percent led by the Commonwealth Bank of Australia, which posted record first half earnings.
China, Taiwan and Hong Kong markets remain closed for the Lunar New Year holiday.
U.S. stocks closed modestly higher on Tuesday, putting the Dow within striking distance of an all-time high.
Investors were likely to continue taking cues from currency markets before the meeting in Moscow of the Group of 20 finance ministers and central bankers on Friday and Saturday, with growing international tensions over exchange rates.
At centre is Japan, where Prime Minister Shinzo Abe's government has made it clear that it will push for aggressive policies to beat stubborn deflation through drastic monetary expansion. Anticipation of much bolder Bank of Japan monetary policy has sent the yen into a steady decline, helping boost Japanese stocks to 33-month highs.
"The Japanese stock market may have rallied too strongly on expectations alone. I don't believe the Japanese government is manipulating currency rates, but it is maybe time that an equilibrium point may be sought for the yen's level given that some other countries may see weaker currencies as beneficial to their economies," said Yuuki Sakurai, CEO at Fukoku Capital Management in Tokyo.
The Nikkei stock average eased 0.2 percent.
The yen rallied on Tuesday, reversing the previous day's late selloff against the dollar and euro after an official with the Group of Seven said it is worried about excess moves in the Japanese currency.
G7 governors and ministers reaffirmed their commitment that fiscal and monetary policies would not be directed at devaluing currencies, a statement meant to reassure investors that Tokyo was not aiming to guide the yen lower with its aggressive expansion of monetary policy.
Bank of Canada Governor Mark Carney said on Tuesday it was critical that no G7 member use monetary policy to target exchange rates.
"All these comments are merely stating the obvious and are not to be taken in the context of whether they are endorsing a weaker yen or not," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, adding that Carney's comments best describe the thinking of the G7.
"What is being said is that monetary policy should be used to achieve domestic objectives and Japan is undertaking reflationary policies, not manipulating currency rates, and the result of that is a weak yen. What is asked for from Japan is to explain its policy clearly at the G20," Saito said.
The dollar was down 0.2 percent to 93.31 yen after marking its highest level since May 2010 of 94.465 on Monday. The euro eased 0.2 percent to 125.49 yen, moving further away from its highest since April 2010 of 127.71 yen touched last week.
The euro steadied around $1.3451, after rising on comments made Tuesday by European Central Bank President Mario Draghi, who said talk of a currency war was overdone, and that Spain was on the right track toward economic recovery.
Markets were keeping their eye on President Barack Obama's State of the Union address for any clues on a deal with Republicans to avert automatic spending cuts due to take effect March 1. The tone of the speech will also be scrutinized, with any sign of compromise likely to be warmly received.
Obama was expected to challenge a divided Congress to back his proposals to create jobs for the middle class.
U.S. crude was up 0.1 percent to $97.60 a barrel and Brent was steady around $118.70.
(Editing by Eric Meijer)