The yen jumped on Tuesday, pulling away from a 4-1/2-year low versus the dollar hit last week, after Japan's finance minister warned that markets should be aware of the risks of one-way bets against the Japanese currency.
The comments by Koji Omi echoed remarks by officials at Group of Seven meetings in the past year referring to carry trades and suggested some concern about the pace of the yen's slide.
Omi's remarks also come as investors have fretted about whether authorities in Switzerland and Taiwan were trying to spook the market from using their currencies in carry trades by pushing short-term interest rates higher.
"I think they have purposely started to try to curb the yen's weakness," said Tomoko Fujii, head of economics and strategy for Bank of America in Tokyo. "I think they are worried that the impact could be too big if they leave things alone and there is an unwinding of carry trades at some point."
The popularity of carry trades - borrowing funds in low-yielding currencies such as the yen to buy higher-yielding assets - has been one of the driving factors in the yen's broad slide to a 20-year low against the New Zealand dollar and a 15-year trough against the pound.
It is the second time in the past few weeks that Omi has tweaked his usual comments on currencies at a regular news conference, having started to say earlier this month he was watching the market carefully.
Analysts and traders said the Ministry of Finance was unlikely to conduct any yen-buying intervention, and unless it did so further warnings would likely lose their effectiveness.
But Japan's low interest rates will continue to work against the yen, and the dollar is likely to eventually make a try for a rise above 125 yen, Matsuura said.
The dollar fell about 0.14 percent from late US trade to 123.48 yen, down from a 4-1/2-year high of 124.14 yen reached on electronic trading platform EBS last week.
The euro dipped 0.14 percent to 166.23 yen, off the record peak of 166.94 yen hit last week on EBS - the highest since the single currency was launched in 1999.
But the euro was little changed at $1.3463, while the pound edged up slightly to $1.9986 and was near a two-month high of $2.0007 struck in the previous session.