(Bloomberg) -- The yen pulled back from a 10-month low against the dollar after Japan issued its strongest warning in weeks over sharp currency moves, raising the odds of government intervention if the slump continues.

The nation’s top foreign exchange official said speculative moves could be seen in the market and warned that Tokyo was prepared to take action if needed.

“If these moves continue, the government will deal with them appropriately without ruling out any options,” Masato Kanda, vice finance minister for international affairs, said on Wednesday.

Kanda’s comments saw the yen immediately strengthen, then reverse course, before advancing again in choppy trading. It was up about 0.3% from Tuesday’s closing level at 147.34 per dollar around 2:15 p.m. in Tokyo as traders weighed the risk of Japan wading into the market for the first time since October last year.

“We have jumped from level four on our verbal intervention scale straight to levels six or seven and a warning of imminent FX intervention,” said David Forrester, a senior FX strategist at Credit Agricole CIB in Singapore. “Importantly, dollar-yen has moved from 146 to nearly 148 in the space of a trading day and policymakers have defined excessive volatility as 2-3 big figure moves in a day.”

Read more: Japan’s Kanda Sends ‘Very Clear’ Warning of Yen Intervention

Kanda said currencies should move stably in the market in a reflection of economic fundamentals, noting that there have been rapid moves this year like last year. Officials are watching the market with a high sense of urgency, he added.

“These developments bring uncertainty to businesses and households, which will have a negative impact on the economy,” he said.

The yen had slumped Tuesday as the US currency strengthened against major peers amid a selloff in Treasuries.

Japan’s monetary policy stance is contributing to the weakness in the yen. While the Federal Reserve edges closer to the end of its aggressive rate hikes to combat the strongest inflation in decades, the Bank of Japan has stuck resolutely to the last remaining negative interest rates among major central banks.

Stimulus Outlook

While the BOJ relaxed its grip on 10—year government bond yields in July, it is still restraining upward movement. Until the central bank makes a clearer step toward paring back its stimulus, weakening pressure on the yen is likely to remain in place.

Japan’s government will be reluctant to step into markets again unless absolutely necessary. Currency officials had largely stayed quiet in recent days as the yen inched lower. They repeatedly said in the past that their concern is sharp movements in the yen rather than specific levels against other currencies.

Last year’s interventions, worth around $62 billion, came after the currency moved more than 2 yen against the dollar in the previous 24 hours. Taking action after sharp moves helps Tokyo justify intervention to its international allies such as the US.

“The yen suddenly fell by more than 1 yen overnight, which had already increased concern about verbal intervention,” said Tsutomu Soma, a bond and currency trader at Monex Inc. “Still, there’s still some way before an actual intervention. Market participants themselves see the line of 150 as a big hurdle.”

--With assistance from Masaki Kondo.

(Adds comments from Credit Agricole, latest prices.)

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