Japan's finance minister expressed heightened concern today about the surging yen, warning that "excessive" volatility was destabilising Asia's biggest economy.
The comments sparked fresh speculation that the Japanese authorities may intervene in the market for the first time since March 2004 to curb the yen's rapid ascent, which is taking a heavy toll on exporters.
"There is excessive volatility" in the yen exchange rate, Finance Minister Shoichi Nakagawa told reporters.
Such "disorderly" moves were negatively affecting economic and financial stability, he said.
"I will continue to watch currency markets with great interest," he added.
Nakagawa declined to comment on whether Tokyo was ready to step into markets to sell the yen, which hit a 13-year high against the dollar and six-year peak against the euro last week as investors took shelter from the financial crisis.
Analysts believe that Japan is unlikely to intervene yet because the US and eurozone authorities would be unlikely to support such a move.
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"We suspect that the MOF (ministry of finance) is unlikely to physically intervene immediately," Barclays Capital analysts wrote in a note.
"However, we think that there is a risk of the MOF unilaterally intervening between 80 and 90 if the dollar/yen keeps declining," they added.
The dollar dropped to the upper 90-yen level on Friday for the first time since August 1995. The greenback was at 94.30 yen in early Tokyo trade.