The yen plunged in Asian currency markets on Monday after Japan's conservative opposition swept to victory in national polls, with promises from its leader to press for more central bank easing.
In early Tokyo trade the dollar bought 84.30 yen, up from 83.52 yen in New York on Friday and at its strongest level against the Japanese currency in more than a year and a half.
The euro also soared to multi-month highs at 111.10 yen from 109.94 yen in US trade.
But by late afternoon trade, the yen clawed back slightly, with the dollar at 84.05 yen while the euro was at 110.58 yen.
The European single currency also bought $1.3154, compared with $1.3161 in New York.
On Sunday, voters dumped Prime Minister Yoshihiko Noda three years after his Democratic Party of Japan (DPJ) promised a change from more than half a century of almost unbroken rule by the Liberal Democratic Party (LDP).
Hawkish LDP head Shinzo Abe pledged to bolster Japan's defences in the face of a territorial spat with China while vowing to pressure the Bank of Japan (BoJ) into more aggressive policy easing measures to kickstart the economy.
He also offered to boost spending on infrastructure at a time when much of the tsunami-wrecked northeast remains a shell of its former self after last year's disaster, which sparked the worst atomic crisis in a generation.
Abe's central bank pledge has weighed on the yen in recent weeks as traders bet that an LDP victory would boost the likelihood of more easing from the central bank, and see the appointment of a like-minded BoJ governor after current chief Masaaki Shirakawa's term ends next year.
But Abe's stated goals may hit political resistance despite Sunday's landslide, National Australia Bank said in a note.
"The upper house will... still have a say in the appointment of new BoJ officials," it said.
"This is of some significance, meaning that the LDP cannot automatically appoint its preferred choices for the posts of BoJ governor and deputy governors (both of them), all of whose terms expire next March and April."
However, speculation over BoJ policy moves were reinforced on Friday after the bank's own quarterly Tankan survey showed confidence among Japanese manufacturers hit a near three-year low in the final months of 2012.
Those were the weakest Tankan results since the start of 2010.
Separate figures showed Japan's economy shrank in the July-September period and may have dipped slightly in the previous three months, meaning the country had technically slipped into a recession.
The dollar was mixed against other Asia-Pacific currencies.
It fell to 1,072.32 South Korean won from 1,073.75 won on Friday, to 41.04 Philippine pesos from 41.14 pesos, to 30.58 Thai baht from 30.64 baht and Sg$1.2201 from Sg$1.2212.
The greenback firmed to 9,697 Indonesia rupiah from 9,694 rupiah while it was flat at 54.55 Indian rupees and Tw$29.05.
The Australian dollar edged up to US$1.0539 from US$1.0536 while China's yuan rose to 13.46 yen from 13.39 yen.