The yen's woes have actually helped exporters

The weak yen is a product of the discrepancy in rates between Japan and the US, with Japan's currency offering less attractive returns.

Japanese policymakers have voiced fears that raising rates excessively could choke the country's economic recovery.

Finance minister Koji Omi said economic trends were good despite the weak yen.

'Easy target'

The dollar rose to 123.97 against the yen on Friday, its highest level since December 2002.

Japanese rates, which currently stand at 0.5%, are well below those of other leading industrialised economies - a product of its long fight against deflation.

As a whole the fundamentals of Japan are in good condition Koji Omi, Japanese finance minister

Although many analysts expect rates to rise to 0.75% as soon as August, further increases are seen as unlikely in the short term.

"The yen is an easy target to sell while currencies with higher interest rates such as the Australian dollar are rallying," said Yosuke Hosokawa, from Chuo Mitsui Trust Bank.

"Since the Bank of Japan is unlikely to take an immediate step to raise its interest rate, yen-selling sentiment is likely to continue for now."

The weak yen favours Japanese exporters, something which has underpinned the strong performance of Japanese stock markets in recent times.

Ministerial confidence

But some analysts are worried about a rapid rebound in currency values which could disrupt the economic turnaround.

Japanese ministers said they were monitoring the currency situation but remained unperturbed about its economic significance.