The yen briefly plunged past the key ¥160 level against the dollar on Monday, plumbing a new 34-year low and intensifying speculation that the Japanese authorities will be forced to intervene later this week.
On Friday the Bank of Japan left rates unchanged, fuelling bets against the currency as it slipped past ¥158.
Traders predicted that Monday, a national holiday in Japan, would pose another severe test. Low-liquidity centres in South Korea, Australia and Singapore appear to be driving volatility.
One Hong Kong-based trader said any intervention would likely occur during London trading hours when liquidity is high.
“We have heard that the Japanese Ministry of Finance officials have been told to be on alert and not necessarily take holiday,” the trader said.
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