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Noda added that he believed he had gained the understanding of his G7 counterparts regarding Japan's stance on currency market intervention during an informal dinner meeting.

"We did not discuss anything about the future, but I believe we've gained understanding on our basic stance," Noda told reporters after the meeting.

Tokyo intervened in the currency market for the first time in six years on September 15 as the yen's steady rise against the dollar threatened to derail Japan's export-reliant recovery from its worst recession in decades.

Investors remain on full alert for further intervention by Japan as an unexpected drop in U.S. payrolls data pushed the dollar to a fresh 15-year low against the yen on Friday.

Noda said his explanation of Japan's currency intervention did not draw any response from other G7 members, but added "various views" were exchanged on currency rate matters.

The G7 finance leaders agreed that currency moves should reflect economic fundamentals, and that emerging economies with current account surplus should move toward a more flexible currency system, Noda said.

When asked whether such emerging economies included China, Noda said: "It's included."

Currency tensions have risen to the top of the agenda for the IMF meetings as policy makers deal with a drive by many of the world's economies to cap the strength of their currencies.

The United States and the European Union accuse China of keeping its currency artificially weak to promote exports, undermining jobs and economic growth in the West.

Japan takes a more hands-off approach and has repeated that a more flexible yuan will benefit China's own economy by keeping inflation in check.

(Reporting by Leika Kihara; Editing by Edmund Klamann)

Normally when the likes of JPMorgan or Intel --also reporting next week -- tell investors how much they earned in the previous quarter, the stock market hangs on every word.

But after Friday's surprisingly anemic payrolls report, the increased likelihood the Fed will buy more assets like Treasury bonds to stimulate the economy has investors ignoring the usual benchmarks.

"Markets have been oscillating between macro and micro data, and the upcoming week will focus on macro," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

The fact that Wall Street closed Friday in the black despite the weak payrolls data is evidence the Fed's action is top of mind for investors at this time.

Action from the central bank has already been baked into the equities rally, with $500 billion as the most talked-about injection. And the risk of a decline in equities is off balance as both good and bad economic news could have a bullish effect on stocks.

"Good news is clearly good and the market goes up," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.

"If earnings or economic news is bad, then we'll get" a second round of quantitative easing, he noted. "Therefore the market will still go up. In that sense, risk is asymmetric."

Economic data next week, including consumer and producer prices, retail sales and consumer sentiment could shed further light on whether the economy has slowed enough to require swift action from the Fed.

"If CPI shows core inflation is going to fall, further odds of aggressive QE --as opposed to a trickle -- will increase and that will be viewed positively by the market," said Praveen.

EARNINGS TAKE BACK SEAT

Intel Corp (INTC.O), JPMorgan Chase & CO (JPM.N), Google Inc (GOOG.O) and General Electric Co (GE.N) are among the largest companies that will post earnings next week. Intel warned in late August that its revenue could fall short and its shares got punished, so there's little space for a negative surprise.

And if Alcoa's report on Thursday was any indication, even bellwethers' numbers may have to vary enormously from expectations to be noted amid all the QE2 talk.

Alcoa Inc (AA.N) marked the unofficial start to earnings season, rising 5.7 percent to $12.89 a day after its results beat estimates. While the stock rose sharply, it was far from the market's focal point, which hinged on the expectation of the Fed's action.

And next week's Treasury auctions, especially of longer-term bonds, may also provide a boost to stocks.

Policymakers could wait until December if they felt the need for greater clarity on the outlook, Bullard told CNBC television, though he acknowledged that financial markets were already assigning a very high probability of Fed action at the November meeting.

"This upcoming FOMC meeting is going to be a tough call, because the economy has slowed but it hasn't slowed so much that it's an obvious case to do something," Bullard said.

"I do think the risk of a double-dip recession has probably receded some in the last six to eight weeks."

Bullard, a self-proclaimed hawk, said the recent downward trend in inflation was a concern. However, he dismissed the argument that more Fed easing, which would take the form of further Treasury purchases, would be ineffective.

He cautioned against allowing the United States to go the way of Japan, a country that has struggled with a prolonged period of depressed prices and economic stagnation.

He indicated that, despite some reluctance about the risks of unconventional policies, the situation might require bond purchases beyond the more than $1.7 trillion the Fed has already conducted in response to the financial crisis.

"It doesn't seem like it's going to come back toward (the Fed's inflation) target unless we take further action," Bullard said.

After bouncing back from the worst recession since the Great Depression beginning last summer, U.S. gross domestic product expanded at a paltry 1.7 percent in the second quarter, raising worries about the prospect of a renewed contraction.

The government is expected to report on Friday that private employers added 75,000 jobs in September after an increase of 67,000 in August, according to a Reuters survey. The report is due at 8:30 a.m. EDT.

There is a risk, however, that overall nonfarm payrolls fell for a fourth straight month after an independent survey this week showed a contraction in private jobs in September.

Government employment is expected to be depressed by the termination of more temporary jobs for the decennial census and layoffs at cash-strapped local and state governments.

In the wake of dovish speeches by senior Fed officials, including Chairman Ben Bernanke, analysts said it was now almost certain that the U.S. central bank would launch a second round of asset purchases -- with many expecting a move in November -- even if the jobs report surprised on the upside.

"They may delay it till December, but the odds favor we get something. It might not be as much as the market wants, because the economy might be doing better," said Michael Strauss chief economist at Commonfund in Wilton, Connecticut.

Expectations that the Fed, which has already pumped $1.7 trillion into the economy by buying mortgage-related and government bonds, would announce a second phase of quantitative easing at its November 2-3 meeting have buoyed U.S. stocks and prices for shorter-dated government debt and have undercut the dollar.

The employment report will be the last before the November 2 mid-term elections in which President Barack Obama's Democratic Party is expected to suffer large losses amid voter dissatisfaction with the state of the economy.

Opinion polls suggest Republicans will take control of the U.S. House of Representatives, which may give them a platform to pursue their agenda of restricting government spending to reduce a record budget deficit.

SIGNS OF IMPROVEMENT

The recovery from the longest and deepest downturn since the 1930s has been too slow to generate jobs, but the labor market is beginning to show some improvement.

First-time applications for unemployment benefits have dropped from a nine-month high touched in mid-August and some surveys have suggested a pick-up in demand for labor.

In addition, the government last month revised payrolls data for June and July to show fewer job losses, and analysts will be watching to seen if the trend continued in August.

"More jobs than people realize are being created," said Brett D'Arcy chief investment officer at CBIZ Wealth Management in San Diego, California.

"This recovery, although a longer recovery, is following the traditional steps of how a recovery happens. We are at the point where we should and probably will see some fairly strong job creation."

The UAE had said it would suspend BlackBerry Messenger, email and web browser services to about 500,000 subscribers from October 11 unless Canadian BlackBerry maker RIM works out a way to locate encrypted servers in the country, so that the government can seek access to messages.

"The Telecommunications Regulatory Authority (TRA) has confirmed that Blackberry services are now compliant with the UAE's telecommunications regulatory framework," a statement on WAM said.

"Therefore all Blackberry services in the UAE will continue to operate as normal and no suspension of service will occur on October 11, 2010," it said.

Saudi Arabia and India also threatened to cut off services but have reached an agreement with RIM, and an UAE official said in September the country was "very optimistic" about reaching a deal before the October 11 deadline.

Before the dispute, Information sent to and from BlackBerries had been encrypted and handled by servers outside the UAE.

The UAE had voiced concerns over its inability to access the information through legal means, citing security and sovereignty issues, and had emphasized it was not able to reach a deal since new telecoms regulations took effect three years ago.

WAM gave no details on the agreement reached.

"The TRA also acknowledged 'the positive engagement and collaboration of Research In Motion (RIM) in reaching this regulatory compliant outcome'," it said.

(Reporting by Andrew Hammond and Raissa Kasolowsky, Writing by Andrew Hammond)

Prime Minister Naoto Kan said Tokyo wanted to cooperate with its Group of Seven peers on currencies, but in the same breath reiterated the message that the authorities would take "decisive steps" if needed.

Global policymakers have been clashing over the dollar's broad-based decline, with emerging economies stepping up efforts to cap rises in their currencies, which developed nations argue could derail the economic recovery.

Some warn that trade protectionism could soon follow if tensions are not eased.

China, which has rebuffed calls from the West to let its currency rise faster, allowed the yuan to firm on Friday to its highest against the dollar since a revaluation in July 2005.

Traders said Beijing may be making some concessions to external pressure but any further rise will be limited so as not to harm its exports.

The Japanese authorities, who are also worried a strong yen would hit its vital export sector, intervened in the market for the first time in six year last month, drawing criticism from its peers.

Finance Minister Yoshihiko Noda noted that competitive currency devaluations were bad for the global economy, but defended Japan's action saying it was aimed at stopping excessive moves and not a signal it will guide the yen to a specific level.

"We are approaching a G7 meeting, but regardless of this, Japan will take firm measures, including intervention, when needed," Noda told reporters when asked about the yen's rise to another 15-year high on Thursday. "This is Japan's basic stance."

The International Monetary Fund will kick off its twice-yearly meeting with the World Bank in Washington later on Friday. G7 finance ministers will hold a closed-door dinner also later in the day while a breakfast of broader G20 finance chiefs is also scheduled.

"CURRENCY WARS"

Officials from developing markets say ultra-low interest rates in rich countries are fuelling massive fund flows into their markets, pushing up their currencies and inflating prices of stocks, property and other assets.

To limit the rise in their currencies, nations from South Korea to Brazil have moved to restrain capital flows or relied on market intervention, fanning fears that such isolated actions could escalate into devastating "currency wars."

In addition to calls from the United States on China for a stronger yuan, European Commission officials said on Thursday that the European Union would keep pressing China to revalue the yuan.

Beijing, however, argues that a steep rise in its currency was neither in China's or the world's interest.

The Federal Deposit Insurance Corp (FDIC), as part of a proposed rule, was expected to say all creditors of large, non-bank financial firms should expect losses in a failure, the WSJ said.

The rules, which could be unveiled as early as Friday, will be part of a broader effort to end the era of "too big to fail" financial institutions, the WSJ said.

The FDIC, which is in the process of voting on the proposed rule, was expected to say that in some instances, certain short-term creditors could expect to get additional payments, the newspaper said.

The FDIC could not be reached for comment.

(Reporting by Sakthi Prasad in Bangalore; Editing by Dan Lalor)