By Leika Kihara
TOKYO (Reuters) - Japan's Ministry of Finance may consider unilateral yen-selling market intervention if speculators drive up the currency, the Nikkei newspaper reported, after failed attempts to verbally curb sharp yen gains.
The yen rose to a 15-year high against the dollar and a nine-year peak versus the euro on Tuesday amid fears the global economy is slowing, testing Japanese authorities' resolve to stem the currency's climb.
The sharp yen rise and declines in the Nikkei stock average have nudged up the previously negligible chances of a monetary easing by the Bank of Japan before its rate review next month, sources told Reuters.
The MOF will consider intervening unilaterally if the Japanese currency rises at a pace of several yen against the dollar in a single day, the Nikkei reported in its Wednesday morning edition.
The dollar sank as deep as 83.60 yen at one point, before crawling up to 84.25 on the Nikkei report. The euro fell as much as 2.2 percent to 105.44 yen, before steadying at 106.43.
Japanese policymakers have tried to talk down the yen and the finance minister sharpened his rhetoric on Tuesday.
But that was not enough to stop traders from pushing the yen to new highs as markets took his refusal to comment on the chance for intervention as a sign the authorities were not ready yet to back up words with action.
Japan has not intervened in the currency market after ending in 2004 a massive yen-selling intervention aimed at preventing a rapid yen rise from aggravating deflation and derailing a fragile economy.
Tokyo will likely have difficulty convincing its U.S. and European counterparts, who see little need to reverse the weakening of their currencies that benefit exports, to jointly step into the market.
But solo intervention by Japan is unlikely to have much effect in curbing yen gains, traders say.
The BOJ is also considering easing monetary policy and lining up its options, although officials are divided on whether to do so before its September 6-7 rate review at an emergency meeting.
The most likely option is for the BOJ to increase the size or extend the duration of a short-term fund supply operation put in place in December, sources familiar with the matter say.
The Nikkei also said the BOJ is considering taking additional monetary easing steps and may do so at an emergency meeting.
"Going the quantitative easing route seems to be the preferred policy move from Japanese authorities should they decide to act," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.
"With U.S. yields where they are, all simple intervention will do is give speculators better levels at which to buy yen."
(Editing by Dean Yates)
(Additional reporting by Wanfeng Zhou, Vivianne Rodrigues, Steven C. Johnson and Nick Olivari in New York)
