Top Japanese officials are considering an intervention to prop up the yen after seeing it fall to a 38-year low against the dollar.
Finance minister Shunichi Suzuki says authorities are watching the currency markets with a “sense of urgency”.
The Tokyo government is warning that high interest rates in the United States and Europe are hurting the yen, and risking economic damage.
In a monthly report, a cabinet office official flagged that “fluctuations” in the markets should be watched closely.
The report says: “The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing. The economy could face downside risks from the effects of continued high interest rate levels in the United States and Europe. Full attentions should be given to fluctuations in the financial and capital markets.”
The yen has weakened to 160.88 against the dollar, the lowest since 1986.
Currency experts think if it keeps going to 165, the Bank of Japan will intervene.
“Rapid, one-sided moves are undesirable. In particular, we’re deeply concerned about the effect on the economy,” Suzuki said.
“We are watching moves with a high sense of urgency, analysing the factors behind the moves, and will take necessary actions.”
Economists think the US Federal Reserve will cut rates more slowly than previously expected.
Japan last intervened to support its currency in April after it hit a 34-year low, buying up a record 9.788 trillion yen ($62.2bn).
Authorities also stepped into the foreign exchange market three times in 2022.
The yen has lost more than one-third of its value since early 2021.
Investors have sold off the currency partly due to the huge gap between US and Japanese interest rates.
Japan has held rates at 0.1% for some time. That is far lower than any other major economy.
