'We are concerned as the movements are excessive. We are watching with great interest,' Finance Minister Fukushiro Nukaga told reporters.

Asked about possible government action such as selling the yen for dollars, he said: 'We do not have concrete ideas.'

The government and investors are worried that the stronger yen will hurt Japan's export-led economic recovery and undermine corporate earnings.

Prime Minister Yasuo Fukuda warned that the yen's surge was not 'desirable,' but was mum on whether the government was considering intervening in the market.

The dollar fell to as low as 95.75 yen (S$1.33) in early Tokyo trade, a level not seen since September 1995, down sharply from 99.18 in New York late Friday.

The greenback later recovered some ground to 97 yen in early European trade.

The stronger yen contributed to a sharp fall on the Tokyo stock market where the benchmark Nikkei-225 index closed down 3.7 per cent at a 31-month low on Monday.

The dollar's plunge against other major currencies has triggered speculation in the foreign exchange market of intervention to prop up the greenback.

But analysts said that the Japanese authorities did not yet appear to be close to the point where they might intervene to curb the yen's rise.

Intervention by the BoJ alone 'will not work this time because the reasons for the dollar's decline are all coming from the US,' Bank of America economist Tomoko Fujii said.

Unilateral intervention by Tokyo to buy dollars for yen might also cause political friction with US President George W. Bush's administration and have a limited effect, economists said.

Monday marked exactly five years since Japan's monetary authorities last intervened on the currency markets. They have since allowed the yen to find its own level against the dollar.

Forex intervention by world central banks has become 'markedly more likely,' Barclays Capital analysts wrote in a note to clients.

But they added: 'Central banks are wary about forex intervention because there is a good chance it will not work, thus causing credibility issues at a time when this is becoming an increasing concern.'

Although the White House says it favours a strong dollar, it appears comfortable with a weaker greenback as it helps US exporters, although the pace of the currency's decline may be causing some concern in Washington, analysts said. -- AFP