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The yen fell as the Bank of Japan began a meeting on Wednesday that may signal its readiness to further loosen monetary policy to support the economy.
The yen has been on a downward trend since a rare joint intervention by leading central banks to weaken the currency.
"The yen is weakening due to expectations for interest rates to rise abroad," said Tsutomu Soma, senior manager at Okasan Securities. "In countries other than Japan, there are moves towards raising interest rates or exiting from extreme monetary easing... But in Japan, a massive amount of funds have been pumped into the money market as an emergency measure."
Japan's Nikkei share average closed down 0.3 percent. A weaker yen ought to be positive for Japan's heavyweight exporters, but investors remain concerned about production capacity knocked out by the devastating March 11 earthquake.
"The dollar going above 85 yen is a significant breakthrough," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management. "But carmakers and other manufacturers have to be able to produce at full capacity first to really feel positive impact. That's why they're not surging on the news."
The Bank of Japan is expected to keep policy on hold at its two-day meeting that started on Wednesday. In contrast, there are strong expectations the European Central Bank will bump its key policy rate up 25 basis points from a record low 1 percent on Thursday to curb inflationary pressures, with markets already pricing in more tightening later in the year.
Minutes of last month's Federal Reserve policy-setting meeting, released on Tuesday, showed the U.S. central bank appeared intent to complete a $600 billion bond-buying plan and to keep rates at exceptionally low levels for an extended period.
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