The yen fell against the dollar and euro in Asian trade Friday as the man tipped to become prime minister after next month's general election said he would embark on aggressive monetary easing.
The dollar bought 81.13 yen in Tokyo trade, sharply up from the 80.20 yen level a day earlier, and almost unchanged from 81.16 yen in New York late Thursday.
The euro bought 103.61 yen, against 102.17 yen in Asia Thursday and 103.69 yen in New York.
The single currency was also at $1.2774 against $1.2778 in New York after it weathered widely expected news that the 17-nation eurozone tipped back into recession in the July-September third quarter.
"The Japanese yen is the stand-out," National Australia Bank said.
"It tends to outperform in periods of risk aversion but the news from likely incoming Japanese prime minister (Shinzo) Abe is enough to keep the currency under pressure," the bank said in a note.
Abe, head of the Liberal Democratic Party (LDP) and a former prime minister, on Thursday called for "unlimited" easing by the Bank of Japan, and vowed to strike a deal with it over further policy measures if he wins on December 16.
Prime Minister Yoshihiko Noda was set to dissolve the lower house of parliament Friday ahead of the elections.
Recent opinion polls showed his centre-left Democratic Party of Japan would come off badly against Abe's conservative LDP.
The Japanese government lowered its domestic economic assessment for a fourth straight month in a report issued Friday, underlining fears about a slowdown in the world's third-largest economy.
Finance Minister Koriki Jojima said Noda had instructed lawmakers to compile a fiscal stimulus package by November 30 to support the economy.
Data out of Europe was relatively downbeat Thursday, with the eurozone technically returning to recession.
"However, this was as expected, and Germany managed a little better positive growth than expected," the Australian bank said.
-- Dow Jones Newswires contributed to this article --