LONDON, Sept 23 - The yen hit three-year highs versus the dollar on Tuesday for the second straight day as markets remained convinced a weekend call from the G7 for more flexible exchange rates meant the Japanese currency should rise. Markets were also shrugging off comments from Japan's top financial diplomat, Zembei Mizoguchi, who said the recent surge in the yen that followed the weekend Group of Seven statement was too rapid and partly due to speculative buying. However, dealers were still wondering whether Japanese authorities might enter the market to smooth the yen's rise. "The market is still testing the Bank of Japan's resolve and we are seeing a new range. We do expect however the BOJ will come in at some point, maybe the level is 110," said David Mann, currency strategist at Standard Chartered. By 0735 GMT, the yen rose as high as 111.25 yen and was up nearly one percent on the day. It was also three-quarters of a percent higher on the euro at 127.65 //