The yen was under pressure in Asian trade on Tuesday after the Bank of Japan held off new easing measures with traders betting the central bank may launch fresh stimulus at its next meeting.
The dollar bought 81.28 yen from 81.19 yen earlier Tuesday while the euro hit 104.09 yen from 103.88 yen ahead of the BoJ announcement.
In New York trade on Monday, the dollar bought 81.40 yen while the euro was at 103.99 yen.
Japan's central bank also kept rates unchanged on Tuesday.
A BoJ statement, which warned over Japan's slowing economy, hinted at further action at its next meeting, said Mizuho Securities chief market economist Yasunari Ueno.
"It raised speculation for a further expansion of the asset purchase programme (in December)," Ueno said.
"It remains fluid what asset the bank would increase and by how much given uncertainty over the upcoming general election, how the government will be shaped and how the foreign exchange market will be affected following the next (US Federal Reserve) meeting," he added.
In October, the BoJ said it would expand an asset-purchase programme -- its main policy tool -- by 11 trillion yen ($135 billion) to 91 trillion yen in a bid to kickstart growth as recovery from last year's quake-tsunami disaster.
The BoJ's decision on Tuesday came days after the frontrunner to become Japan's next prime minister vowed aggressive monetary easing to fix the nation's economic woes, ahead of general elections next month.
Shinzo Abe, head of the conservative opposition Liberal Democratic Party, has been widely tipped to unseat Prime Minister Yoshihiko Noda in the polls.
Against the dollar Tuesday, the euro rose to $1.2806, from $1.2778 in New York, where the unit had dipped on news that Moody's cut France's gold-plated AAA credit grade on the eve of a crucial eurozone meeting.
"(It) could suggest countries like Spain may be its next target," Kengo Suzuki, forex strategist at Mizuho Securities, told Dow Jones Newswires.
The euro won some support as eurozone finance ministers said they will reach a tentative agreement at their meeting Tuesday to distribute a bailout to Greece so it avoids a messy default.