Nov. 10 (Bloomberg) -- The U.S. favors a strong dollar, Treasury Secretary Timothy Geithner told Japanese Finance Minister Hirohisa Fujii.

“The U.S. wants a strong dollar and I confirmed that with Geithner tonight,” Fujii told reporters after a dinner with Geithner in Tokyo. “I think that is probably what we are going to see eventually.”

The U.S. dollar is the worst performer against the yen among 16 key currencies since the ruling Democratic Party of Japan won power on Aug. 30. The U.S. wants to strengthen its own currency and the weaker dollar is responsible for gains in the yen and euro, Fujii said yesterday in parliament.

Since coming into office, Fujii has fueled the yen’s gains by saying foreign-exchange rates should be decided by markets and governments should avoid buying or selling currencies. The yen’s 8 percent appreciation against the dollar in the past three months has hurt exporters such as Toyota Motor Corp. by reducing the value of their repatriated profits and making their products more expensive abroad.

Fujii today denied ever saying that a strong yen is either good or bad for Japan.

Bond yields have been rising since the Democratic Party of Japan won power in August, on concern that the government’s pledges to support households will swell the world’s largest public debt.

Fujii said earlier today he’s “very concerned” about a recent increase in interest rates, a day after yields on 10-year government debt climbed to the highest in more than four months.

Japan’s debt burden will increase to twice the size of the economy next year and it’s urgent for the government to set a specific target to improve its finances, according to the Organization for Economic Cooperation and Development.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

Last Updated: November 10, 2009 08:16 EST