The yen slipped to a six-year low on Monday, after the Bank of Japan stepped into the market to stop government bond yields from rising above its key target, while bitcoin jumped to nearly its highest this year.

The BOJ on Monday morning offered to buy unlimited amounts of 10-year Japanese government bonds (JGBs) at 0.25%, after the 10-year JGB yield crept up to a six-year high of 0.245%.

The dollar topped ¥125 in afternoon trade, its strongest since August 2015. It has climbed nearly 6% on the yen in the last 12 sessions.

"The market sees monetary policy divergence between the U.S. and Japan as the key driver of dollar-yen, so in contrast to the hawkish Fed comments recently, the (BOJ's action) gives the impression that the BOJ remains dovish, and that's leading to a higher dollar-yen," said Shinichiro Kadota, senior currency strategist at Barclays in Tokyo.

"I think the risk is still to the upside in the near term, especially if this monetary policy divergence story stays intact. But the speed has been quite fast and it does seem a little overheated, so if we see any contrary headlines, we could see some correction as well," he added.

The 10-year Treasurys yield was last 2.5046%, having jumped 33 basis points last week.

High commodity prices are also hurting the yen as they contribute to a widening of Japan's trade deficit, though at the same time they have provided a powerful impetus to commodity currencies.

The Japanese yen has been the major loser as policymakers keep yields near zero and sky-high commodity prices send its import bill ballooning.

"While a risk of near-term correction has risen given the rapidity of its ascent, we expect dollar-yen to remain well-supported at high levels," said analysts at Barclays, citing monetary policy divergence and the negative impact from higher commodity prices on Japan's terms-of-trade.

The U.S. Federal Reserve's firmly hawkish stance has markets pricing in an aggressive pace of rate hikes this year, while the BOJ is remaining dovish, particularly given policy markers' fears that higher prices caused by rising energy costs could hurt the world's third-largest economy.

A senior Japanese government official said on Sunday that monetary policy must remain loose.

The key data event of this week will be U.S. payrolls on Friday when another solid increase of 475,000 is expected with the jobless rate hitting a new post-pandemic low of 3.7%. Also due are a bevy of surveys on global manufacturing and readings on U.S. and EU inflation.

"The U.S. data will help shape expectations whether the tightening in financial conditions is starting to spill into the broader economy," said analysts at NatWest Markets.