By Ronnie Harui

The yen fell to a 40-year low against the dollar in Asia on Tuesday, putting traders on high alert for potential currency intervention by the government.

Japanese Finance Minister Satsuki Katayama on Tuesday renewed her pledge to stop excessive yen volatility. "We will take appropriate action on currencies at any time as needed," Katayama said at a news conference. "During the recent online meeting between the Japanese and U.S. finance chiefs, we confirmed that taking decisive steps is included" as an option, she added, suggesting that the Japanese government could step in to prop up the yen.

The yen recently weakened 0.2% to 162.20 per dollar after earlier touching 162.40, its lowest intraday level against the greenback since 1986, FactSet data showed.

"A key level has broken, and JPY remains a low yielder, so more weakness is likely in the near term," said Abbas Keshvani, director of Asia Macro Strategy at RBC Capital Markets, in an email. "The last month has seen broad dollar strength, so this is not a yen problem," the director added.

Market forces such as the dollar's strength are pressuring the yen, and appear to have led Japanese authorities to move the line in the sand that would prompt them to defend the currency to around 163 against the dollar.

"Based on past intervention episodes, though we note the sample size is extremely limited, we are mindful about MOF intervention becoming increasingly likely, as USD/JPY approaches the 163 level," analysts of Nomura's Global FX Strategy said in a note. They based this on data from yen-buying interventions in 2022 and 2024.

Japan has struggled to stem persistent yen weakness. Finance ministry data showed that Japan spent a record 11.7349 trillion yen, or about $72.47 billion, on currency intervention between April 28 and May 27. But that only offered temporary relief, with the selloff starting again as risk appetite returned on easing tensions in the Middle East.

Maybank analysts in a report said "there is ample ammunition available for" foreign-exchange intervention by the Japanese authorities. They estimate Japan has $162.24 billion in deposits and $931.68 billion in securities, which would eclipse the amount it spent intervening in the market earlier this year.

Signs that U.S.-Iran peace talks would resume Tuesday and Wall Street's tech-led rebound overnight buoyed risk-on sentiment, which tends to weigh on safe-haven currencies such as the yen. Also, prospects for a slow pace of interest-rate increases by the Bank of Japan compared with ongoing expectations of a rate hike by the Federal Reserve spurred further yen weakness while the dollar strengthened.

The yen's decline is also stoking concerns around inflation in Japan. The country of some 123 million people relies heavily on imports of essentials such as food and energy. Crude oil and natural gas are priced in dollars, which become more costly for buyers such as Japan when their own currency falls in value.

Any sharp jump in import costs could compel the Bank of Japan to raise interest rates, potentially undermining the country's fragile economic recovery. At its June meeting, the central bank raised rates by 25 basis points to 1.0%, representing a 31-year high.

Write to Ronnie Harui at ronnie.harui@wsj.com