The yen rose to about 3 percent shy of the level it was trading at before the surprise monetary easing step the Bank of Japan took in October 2014 saw it tumble. Traders are now wondering if policymakers will seek to arrest gains that threaten to undermine years of unprecedented monetary stimulus.

The currency has strengthened at least 2 percent against all its 16 major peers this month, with its biggest gains versus the Mexican peso, South African rand and the dollar. While Japanese markets were closed for a public holiday Thursday, traders will watch for comments from officials, given the yen's strength, BNP Paribas SA said. HSBC Holdings Plc warned there's a growing risk that the BOJ will step in to sell yen or cut interest rates, while Morgan Stanley sees authorities limiting themselves to warning investors against pushing the exchange rate too far.

"Markets appear to be testing the resolve of the BOJ and questioning the ability of monetary policy action to create a weakening Japanese yen," said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. "Nobody really wants their currency bouncing around too rapidly. That in itself, irrespective of the level, does suggest that there could be some smoothing action just to slow it down."