Bank of Japan Gov. Toshihiko Fukui voiced concern Monday about the yen rising against the dollar.

He said a stronger yen might undermine Japan's gradual recovery, and the central bank will "closely monitor developments in financial and foreign-exchange markets and their impact on the economy."

Fukui was speaking at the outset of a quarterly meeting of BOJ branch managers in Tokyo. The dollar is moving at three-year lows around 106 yen.

Foreign exchange is also likely to be taken up during a two-day meeting of top financial officials of the Group of Seven countries in Boca Raton, Fla., beginning Feb. 6. Fukui will attend the meeting with Finance Minister Sadakazu Tanigaki.

Fukui said the economy is "recovering gradually" and "expected to keep recovering," though the pace of the pickup will remain moderate given persistent structural problems such as excessive corporate debt.

Some analysts cautioned that a further rise of the yen against the dollar might threaten Fukui's optimistic outlook. A firm yen makes Japanese exports more expensive than those of foreign competitors, which could hurt Japan's exporters and cause the export-driven recovery to falter.

Eiji Muto, general manager of the BOJ's Osaka branch, quoted major high-tech manufacturers in the Kansai region as saying they do not want to the yen to appreciate any further against the dollar.

Muto said demand for digital home electronic products, such as digital cameras and flat-panel TVs, is gathering steam both at home and abroad.