The yen dropped the most in about five months against the US dollar yesterday after Japan intervened in the foreign exchange market to weaken its currency.
The yen dropped 3 per cent to 79.40 per dollar, set for the largest intraday decline since March 18 this year, when the Groupof Seven nations jointly sold the currency.
Japan's 10-year bond yield fell below 1 per cent and the Nikkei 225 Stock Average rose 0.9 per cent.
Finance Minister Yoshihiko Noda said Japan took unilateral action to sell the yen, which earlier this week neared a post-war record.
The move comes a day after the Swiss central bank cut interest rates and said it would boost the supply of francs to curb the "massively overvalued" currency.
Concern the US recovery is faltering had driven investors toward the relative safety of the yen and the franc, and is spurring speculation the Federal Reserve will start another stimulus programme.
"Because of what the Swiss National Bank did yesterday, cutting their rate to near zero again, that gave some urgency for Japan to act as well," said Lee Wai Tuck, a currency strategist at Forecast in Singapore. "There may be some temporary effect but as we've seen in the past, the impact of intervention doesn't last that long. There will still be interest to buy the yen at a lower level."
The yen weakened against all 16 of its major counterparts and sank 2.2 per cent to €112.85 against the euro.
The Japanese currency, which this week climbed to near the 76.25 per dollar record reached in March, also weakened on prospects the Bank of Japan will follow its Swiss counterpart in easing monetary policy.
Noda suggested the central bank may follow with monetary stimulus, saying that he hoped the Bank of Japan would take appropriate action.
The European Central Bank and Bank of England are also scheduled to decide today on monetary policy.
Japan's benchmark 10-year yield fell two basis points to 0.995 per cent at Japan Bond Trading, the nation's largest interdealer debt broker.
That is the first time yields have dropped below 1 per cent since November.
Japanese exporters rose, with Nintendo surging 4.4 per cent and Toyota Motor rallying 1.4 per cent.
