The dollar soared against the yen in Tokyo on April 7, briefly hitting 125 yen for the first time since February 1993 amid growing expectations of higher interest returns on U.S. securities.

The dollar changed hands at a 50-month high of 125.00 yen in the early afternoon before falling back to 124.68-71 yen at 5 p.m., almost the same as the 124.69-72 yen marked at 9 a.m. but up from 124.20-30 yen late April 5 in New York. The dollar gave up some of its early gains as its rise to 125 yen brought fears that the Bank of Japan would step in to keep the yen from falling further, a commercial bank said.

Widening gaps between Japanese and the U.S. interest rates enticed Japanese banks and institutional investors to build their long dollar positions to finance their purchases of U.S. securities, they said. There was speculation that the U.S. Federal Reserve’s policy-setting body would call for further interest rate hikes at its next meeting late next month.

The flagging Japanese economy, on the other hand, is leaving the BOJ with limited room to guide interest rates higher. Shoichiro Toyoda, chairman of the Japan Federation of Economic Organizations (Keidanren), expressed concern about the recent decline of the yen against the dollar. “Sharp fluctuations of the yen are unfavorable,” Toyoda said. “The recent exchange rate does not reflect the fundamentals of the Japanese economy.” He said that a desirable yen rate would be between 110 yen to 120 yen against the dollar.

Tsutomu Makino, vice minister of international trade and industry, said the government will “continue to closely monitor” the exchange rate fluctuations. Makino tried to dismiss U.S. concerns over a possible surge in Japan’s trade surplus. A weaker yen makes Japanese exports more competitive on the global markets.

“Although recent monthly data showed an increase in the surplus, the rise stemmed mainly from temporary reasons, including seasonal factors,” Makino told a news conference. “I don’t think the surplus will post an increase on an annual basis.”

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