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Japan's solo intervention to weaken the yen on Wednesday arrived sooner than many market participants had expected, making investors suspect officials in other Asian economies may keep their currencies weak and pushing up longer-term U.S. Treasury yields.

For a yen PDF, click: r.reuters.com/zuz33p

"After Japan joined the club of Asian central banks by intervening in the FX market, investors will now look to determine how successful the policy will turn out be," Mitul Kotecha, global head of foreign strategy at Credit Agricole CIB, said in a note.

"In the near term there will be wariness of further intervention to push the yen weaker, which will also keep other Asian currencies on the back foot."

Asia's currencies are a major focus among investors globally, especially with the Chinese government setting the yuan's mid-point for its trading range at a post-revaluation high for the fifth day in a row.

Beijing is under fire from Washington, where lawmakers have threatened to take action against China's currency practices. U.S. Treasury Secretary Timothy Geithner will tell policymakers later in the day that he is looking for ways to get Beijing to move faster on the yuan, his prepared remarks to Congress showed.

All eyes were on the U.S. dollar dripping lower against the yen. Japan did not appear to step in to currency markets during Asian trading hours, leaving what one trader called a "deafening silence."

JAPAN'S RESOLVE

The U.S. dollar was down 0.5 percent at 85.30 yen, not too far from Wednesday's high of around 85.75 yen. Dealers on Thursday may further test Japan's resolve to keep the yen weak, though portfolio managers with a longer time horizon could hold off on closing out of bets on yen weakness.

"Institutional investors have started to close their yen-short/dollar-long positions since mid-August, which I think has helped to accelerate the yen's rise. Intervention could make those investors think twice about closing their positions," Kimihiko Tomita, the head of forex at State Street Global Markets in Tokyo, said.

The yen was climbing the most against other currencies. The Australian dollar, for example, rose 0.9 percent to 79.74 yen.

Still, expectations that Japan is determined to make its yen selling policy effective made Japanese exporter stocks outperform most of Asia.

Japan's Nikkei share average .N225 was largely unchanged after earlier climbing to the highest since August 10. Large and liquid exporter stocks outperformed the broad market, with Toyota Motor Corp (7203.T) up 2.2 percent.

Despite the Nikkei's stand-out equity gains this week, Japan has significantly underperformed other advanced stock markets in the current quarter. U.S. and European stocks are up some 9 percent while Japan has eked out a gain of 1.3 percent.

The MSCI index of Asia Pacific stocks outside Japan slipped 0.6 percent .MIAPJ0000PUS on profit taking in the materials sector. Commodity-related stocks have been outperforming the MSCI index, climbing 20 percent since June compared with the index's returns of 16 percent.

Investors will be looking to reports on new U.S. jobless claims, producer prices and a regional manufacturing report later in the day. Recent data has suggested the U.S. economy is stuck in a soft patch but do not suggest a new recession is brewing, as some analysts had feared.

Investors took advantage of the overnight rise in the late-maturity U.S. Treasury yields and bought the bonds back. The 10-year U.S. Treasury yield slipped two basis points from late Wednesday in New York to 2.70 percent.

Japan's yen selling had weighed on long-maturity U.S. yields on Wednesday in anticipation that the purchased dollars would presumably be recycled into short-maturity Treasuries.

The spread of 10-year Treasury yields over Japanese bond yields widened to the most in almost a month, offering another reason for dealers to get behind dollar strength against the yen.

Gold was nearly unchanged at $1,267.35 an ounce after hitting a record high of $1,274.75 on Tuesday.

U.S. crude fell for a third straight day, down 0.5 percent to $75.64 a barrel, after Enbridge said U.S. regulators have agreed to a Friday restart of the company's biggest pipeline from Canada, restoring crude supplies to Midwest refiners.

(Additional reporting by Hideyuki Sano in Tokyo; Editing by Nick Macfie)

The Senate is expected to hold a series of votes in the morning on the package of lending incentives and tax breaks and could possibly give it final approval.

The House of Representatives has passed a similar bill and is expected to quickly approve the Senate's version.

With the unemployment rate stuck at 9.6 percent, voters cite jobs and the economy as their top concern and say Obama has not done enough on the issue.

Republicans are poised to rack up big gains in the November 2 elections and could win control of one or both chambers of Congress.

If the measure clears Congress, it would be a rare victory on the job-creation front for Democrats, who have seen many of their other efforts blocked by Republicans this year.

Republicans have characterized the bill as a bailout along the lines of the unpopular Wall Street bank rescue effort, and blocked action at the end of July. Returning from a monthlong break, two Republicans broke with their party on Tuesday to give Democrats the votes they need to advance the bill.

"While I'm grateful for this progress, it should not have taken this long to pass this bill," Obama said on Wednesday.

Smaller firms have complained of trouble getting access to credit after the 2007-2009 financial crisis, when many banks sharply pulled back their lending activity.

The bill, which is backed by industry groups, would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms.

It would also exclude from taxes all capital gains on sales of small-business stock, and ease tax rules for expending

and depreciating equipment. Tax breaks in the bill total $12 billion.

Democrats estimate the measure could create 500,000 new jobs. Some 8 million jobs have been lost since the recession began in late 2007.

Republicans, meanwhile, have invoked small businesses as they oppose an Obama proposal that would raise income taxes on the wealthiest 3 percent of U.S. households, arguing that it would snare many who file business income as personal income.

(Reporting by Andy Sullivan, Editing by Vicki Allen)

The Congressional Oversight Panel said in its latest monthly report that the public "stigma" surrounding the Troubled Asset Relief Program has constrained policy choices and may make it politically impossible to take similar rescue actions in the future.

"Popular anger against taxpayer dollars going to the largest banks, especially when the economy continues to struggle, remains high," the panel said in its September report.

"The program's unpopularity may mean that unless it can be convincingly demonstrated that the TARP was effective, the government will not authorize similar policy responses in the future. Thus, the greatest consequence of the TARP may be that the government has lost some of its ability to respond to financial crises in the future."

The report, issued on the second anniversary of the crisis that drove Congress to approve the $700 billion bailout effort, consulted several prominent economists to evaluate TARP's performance. They concluded that TARP provided critical support at a time when the financial system was in "freefall," but created significant moral hazard in the financial system.

"As long as huge banks can count on taxpayer-funded rescues, we should not be surprised if banks take on enormous risks, knowing they can keep the profits if the banks win and shift the losses onto the taxpayers if he banks lose," said Damon Silvers, the panel's deputy chairman, told reporters.

Panel Chairwoman Elizabeth Warren recused herself from approval of the report, Silvers said. Warren is expected to be soon named by President Barack Obama to an advisory role to set up a new consumer financial watchdog agency, Democratic sources have told Reuters.

The panel under the leadership of Warren, a Harvard Law School professor, has been critical of Treasury's handling of the bailout program, arguing that its housing rescue efforts have been ineffective and taxpayers weren't adequately protected in some bailout decisions.

The latest report also concluded that Treasury Secretary Timothy Geithner's decision to extend TARP until October 3 of this year did little other than to keep alive the government's implicit guarantee of the financial system.

A plan to extend more capital to small and community banks on easier terms met with resistance from bank executives and no new funds were added to address foreclosures or aid securitization markets.

Treasury spokesman Mark Paustenbach, responding to the report, said the need for new bailout programs has been largely negated by landmark financial reform legislation, which "have clear mechanisms for shutting down large financial institutions at no cost to the taxpayer."

Harvard University economist Kenneth Rogoff, consulted for the report, said in written remarks that the government's bailout policy must be given credit for "averting the second great depression that might have happened in its absence. It has not, however, succeeded so far in giving a measurably better trajectory for the economy than has been typical after other postwar deep financial crises."

(Editing by Kim Coghill)