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TOKYO (AFP) - The yen gained ground in Asian trade Wednesday as China's latest effort to cool its booming stock market led investors to cut back on riskier investments funded with cheap Japanese credit, dealers said.

They said news that China will triple securities stamp taxes jangled investor nerves, sending Chinese share prices sharply lower in early deals.

The dollar edged down to 121.41 yen in Tokyo morning trade from 121.64 in New York trade late on Tuesday.

The euro slipped to 1.3440 dollars after 1.3448 and fell to 163.11 yen from 163.63.

The yen rose on news China will hike stamp duties on share trades to 0.3 percent from 0.1 percent investors pared riskier 'carry trades' which draw on cheap Japanese credit to invest in emerging and other overseas markets, dealers said.

"Carry-trade jitters (returned) after China announced it will triple the stamp duty ... in a move designed to cool the overheated stock market. This supported the yen," noted National Australia Bank currency strategist John Kyriakopoulos in Sydney.

But dealers added that sentiment toward the dollar was still generally positive in light of recent robust US economic data, including a stronger than anticipated survey on US consumer confidence released overnight.

The market was largely unaffected by an unexpected 0.1 percent dip in Japan's industrial output in April which dashed market hopes for an increase.

Concerns over the drop were mitigated by the government's forecast that output would rise 1.8 percent in May and 1.4 percent in June.

Marito Ueda, a currency trader at FX Prime, said the industrial output report was not enough to move the market on its own.

Ueda added that he thinks the Bank of Japan will still raise its key interest rate sometime this year despite the unexpected dip in output.

With Japan's unemployment rate at a nine-year low, many other economists also expect another Japanese interest rate rise in the second half of 2007 after the July upper house elections are out of the way.

Political factors will "discourage the BoJ from raising interest rates earlier," said Barclays Capital forex analyst Toru Umemoto, who sees the dollar rising to 123 yen by the end of June.