The yen hovered near a seven-month low against the dollar on Tuesday and was seen likely to stay under pressure in the near term amid mounting political calls for more aggressive monetary expansion.
The yen showed little reaction after the Bank of Japan held off from additional monetary stimulus as widely expected, with the central bank holding fire after having eased in September and October.
The dollar last traded at 81.25 yen, down 0.2 percent from late U.S. trade on Monday. The greenback was within sight of the previous day's high of 81.59 yen, the dollar's highest level versus the yen since late April.
Analysts said the yen may have more room to fall in the near term after having slid over the past week on market expectations that a likely new Japanese government would push the BOJ toward more forceful monetary stimulus.
I think we are going to see new highs. We are going to break out of the topside of the range around 82. The risk is that we could extend a little beyond that point, said Todd Elmer, currency strategist at Citi in Singapore.
It may be prudent, however, to be cautious about selling the yen based solely on BOJ easing expectations, Elmer said.
Ultimately, the yen is not strong because policy is especially tight in Japan, it's strong because policy is exceptionally easy elsewhere, he said, adding that it remained unclear whether additional BOJ easing would be effective in weakening the yen.
Japan's opposition Liberal Democratic Party (LDP), which has a commanding lead in opinion polls ahead of an election on Dec. 16, has become increasingly vocal in its calls for more monetary stimulus.
Shinzo Abe, the leader of the LDP, has called on the BOJ for bolder policy action, including unlimited easing, pushing interest rates to zero or below zero and directly underwriting bonds issued to fund public works spending.
In the latest sign of the LDP's stance on monetary policy, the Nikkei newspaper reported that the party is likely to include in its campaign platform a pledge to consider revising a law guaranteeing central bank independence.
While there is the possibility of the LDP toning down its rhetoric after the election, such calls for forceful BOJ easing are likely to persist for now and support the dollar against the yen, said Rob Ryan, a strategist at RBS.
I don't see a reversal right now, Ryan said,