The yen dropped to a four-decade low against the dollar on Tuesday, raising expectations that the government may intervene to stem the currency's decline. Overnight, the yen fell to 162.41 against the greenback, breaching the 162-per-dollar level for the first time since 1986. Japan's Finance Minister Satsuki Katayama reiterated that the government was ready to take appropriate action at any time as necessary to stabilize the currency, while Chief Cabinet Secretary Minoru Kihara said the government will work towards building an economy resilient to foreign exchange volatility and is prepared to intervene when needed. ING economists noted that the Bank of Japan sold around $70 billion of dollars in late April and early May when USD/JPY started trading above 160, and while 162 is widely seen as another line in the sand, Tokyo may prefer to hold off intervention until Friday's U.S. holiday-thinned market conditions or until shortly before the next Japanese public holiday, potentially the July 16-17 window ahead of Marine Day on the 20th. The dollar has strengthened over the past month as traders increasingly bet on the Federal Reserve hiking interest rates this year, and although the Bank of Japan raised its benchmark rate this month to 1%, the highest since 1995, it remains well below U.S. rates, sustaining carry trades where traders borrow in yen to invest in higher-yielding assets.