The yen hit a two-week low against the dollar on Friday after a media report said that the Bank of Japan could expand its negative interest rate policy beyond its current applications.
The BoJ is considering applying negative rates to its lending programme for financial institutions, Bloomberg reported on its Web site on Friday.
The BoJ may consider the new step if the central bank decides to lower further the negative rate that it already applies to some bank reserves parked with the institution, the report said.
The BoJ’s next two-day policy review ends on April 28.
The dollar rose to as high as 110.20 yen following the Bloomberg report, and was last trading at 110.13 yen, up 0.6 per cent on the day.
The reported scheme may provide an added incentive for banks to provide loans for any reconstruction related funding needs following the recent earthquakes in southern Japan, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
“If you ask whether this will trigger a rise in the dollar against the yen toward 120 yen or 115 yen, I don’t think it will have that kind of impact,” Murata added.
The yen also fell against the euro, which rose 0.8 per cent on the day to 124.45 yen.
Against the dollar, the euro edged up 0.1 per cent on the day to $1.1302.