LONDON (Reuters) -A blast of suspected intervention by the Bank of Japan (BOJ) on Monday to boost the yen did little to tame the dollar, while the pound see-sawed as former finance minister Rishi Sunak emerged as the front-runner to be the next British prime minister.

The yen hit a low of 149.70 per dollar overnight before being swept to a high of 145.28 within minutes in a move that suggested the BOJ, acting for Japan's Ministry of Finance (MOF), had stepped in for a second day. The yen was last at 149.37, down nearly 1.1% on the day against the greenback.

"The price action should be worrying for the MOF, as it suggests that there is strong demand to buy into dollar/yen dips," said Sean Callow, a senior currency strategist at Westpac in Sydney.

"The timing should have been good for intervention, with U.S. yields still falling in the wake of the WSJ Fed story Friday."

Yen overnight volatility surged to its highest since Sept. 21, the day before the BOJ stepped in to prop up the currency for the first time since 1998.

The dollar held firm in the face of a report on Friday from the Wall Street Journal that said Federal Reserve officials will likely debate the size of future interest rate hikes, which in turn kept Treasury yields from drifting higher.

Japan likely spent a record 5.4 trillion-5.5 trillion yen ($36.16 billion-$36.83 billion) in its yen-buying intervention last Friday, according to estimates by Tokyo money market brokerage firms.

Traders also suspect the BOJ has intervened more than once in the past month to shore up a currency that has tumbled 22% this year against the dollar.

The Japanese government has committed to keeping borrowing costs ultra low, meaning the BOJ is also intervening in bond markets to keep yields under control.

"Clearly, the market does not see the current framework as sustainable and every day last week the BoJ had to step in with special bond buying operations to keep the 10-year government bond at 25 basis points. Japan's 10-year swaps trade at 65.5 basis points, and this tells a fitting picture," Pepperstone strategist Chris Weston said.

The U.S. dollar also made gains against other major currencies, with the euro down 0.4% at $0.9823.

Sterling see-sawed on news former prime minister Boris Johnson had dropped out of the Tory leadership contest, and was last up 0.1% at $1.1319, off an overnight high above $1.14.

Johnson said he had withdrawn from Monday's contest to replace Liz Truss, who was forced to resign as prime minister after launching a fiscal plan that unleashed turmoil in UK markets.

Former Chancellor Rishi Sunak has emerged as the clear frontrunner to become Britain's next prime minister.

"Sterling price action seems to assume the advent of a Sunak/Hunt ticket as PM/Chancellor and a focus on trying to restore some of the UK's lost fiscal credibility," ING strategist Chris Turner said.

"After the failed experiment with Trussonomics, the challenge facing the new team will be harder than the one that existed earlier this summer and probably a reason why international investors will not want to chase GBP/USD