Japan's government will consult with the Bank of Japan to make sure the redemption of financing bills (FBs) issued to fund its recent yen-selling intervention does not disrupt money markets and cause interest rates to rise, a government source told Reuters on Friday.

Tokyo stepped into the currency market last month for the first time in more than six years, selling 2.1249 trillion yen ($25.44 billion) in the month to Sept. 28, to stem a yen rise that is threatening Japan's fragile economic recovery.

By law, the government does not have the right to print cash and has to fund its intervention by issuing financing bills (FBs). It sets the intervention amount and the BOJ, which has the right to print cash, acts as its agent and temporarily underwrites the bills.

The BOJ then sells yen, but the Ministry of Finance must eventually pay back the BOJ by selling the same amount of FBs in the money market.

The source said the government would deal appropriately with the sale of the FBs in consultation with the central bank, while taking into account its coffers and the impact on markets.

The government stance shows its intention to collaborate with the BOJ in keeping intervention unsterilized, to maximize the benefits of intervention.

The BOJ has so far left the government's currency intervention unsterilized by allowing the yen selling to expand the money supply. The government is likely to explicitly pressure the central bank to continue leaving intervention unsterilized and to ease policy in other ways to maximize the benefits of intervention.

Unsterilized interventions, a departure from the usual central bank practice of absorbing the extra funds through issuance of government bills, effectively make intervention a part of a monetary loosening mix.