June 18 (Bloomberg) -- The yen gained for a fifth day against the dollar after Japanese Prime Minister Naoto Kan pledged to cut the world's largest public debt, saying failure to do so may undermine the country's sovereignty. Japan's currency rose versus 15 of its 16 major counterparts as Kan also said he'd consider the opposition Liberal Democratic Party's proposal to raise the consumption tax to 10 percent. The euro headed for its biggest weekly advance versus the dollar in more than a year as increased demand at Spain's bond auction eased concern about Europe's debt crisis. "The structural reforms appear to be aimed at securing funding sources," said Yuji Saito, director of the foreign- exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. "This is likely to be positive for the yen." The yen rose to 90.91 per dollar as of 9:08 a.m. in Tokyo from 91.01 in New York yesterday, when it climbed to 90.51, the strongest since May 27. The currency advanced to 112.64 per euro from 112.76. The euro traded at $1.2391 from $1.2389 yesterday, when it touched $1.2413, the highest since May 28. The currency has risen 2.3 percent this week, the most since May 22, 2009. The yen headed for a second weekly gain versus the dollar after the ruling Democratic Party of Japan, in an election document distributed to reporters yesterday, called for cross- party talks on raising Japan's 5 percent consumption tax. The plan also reiterated a goal of 3 percent annual economic growth over the next 10 years. 'Fiscal Rehabilitation' "Unless we work on fiscal rehabilitation, an international organization such as the International Monetary Fund could control our fiscal management," Kan said yesterday. "We must rehabilitate our finances with our own power without relying on other countries." The remarks, which came after the DPJ released its manifesto for next month's Upper House election, show the government's increased willingness to tackle debt that is approaching 200 percent of gross domestic product. The euro strengthened for a second day versus the dollar as Spain sold 3 billion euros ($3.71 billion) of 10-year debt at an average yield of 4.864 percent, less than the 5.04 percent that the bonds traded at yesterday before the sale. Demand was 1.89 times the amount on offer. The nation also sold 479.2 million euros of 30-year debt at 5.908 percent, with a bid-to-cover ratio of 2.45, higher than the 1.38 at the previous sale on March 18. "The Spanish bond auction was better than expected, providing a boost to risk appetite and allowing the euro-dollar to break the $1.2350 resistance," analysts led by Hans-Guenter Redeker, London-based global head of currency strategy, wrote in a research note today. European Union Leaders European Union leaders yesterday agreed to disclose how banks perform on stress tests, seeking to show investors the financial system can withstand shocks. The Australian and New Zealand dollars traded near four- week highs versus the greenback, set for their first back-to- back weekly gains since April, as concern eased that the debt crisis in Europe will derail global growth. "The fact that the Europeans are going to release stress tests for their banks will help to calm investor concerns," said Khoon Goh, senior economist at ANZ National in Wellington. "The Australian dollar should perform in an environment where risk is put back on the table." Australia's currency traded at 86.69 U.S. cents from 86.86 cents yesterday and earlier touched 86.89 cents, the most since May 18. New Zealand's dollar fetched 70.36 U.S. cents from 70.45 cents, after reaching 70.61 cents, the strongest since May 17. --With assistance from Sachiko Sakamaki and Takashi Hirokawa in Tokyo and Candice Zachariahs in Sydney. Editors: Nicholas Reynolds, Rocky Swift

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