The yen was little changed against the dollar on Wednesday one day after a sharp rally, and traders appeared ready to resume selling the yen on expectations of more monetary stimulus in Japan.
The dollar has risen about 10 percent against the yen since mid-November. The yen staged a forceful recovery on Tuesday after the Bank of Japan disappointed investors who had hoped for aggressive easing actions.
Analysts said the yen's outlook remains bleak. The BoJ will remain under pressure to inject more stimulus into the economy, which will hurt the currency. Charts and positioning in the options market also pointed to medium-term yen weakness, with some betting on a move to 100 yen per dollar.
Paresh Upadhyaya, director of currency at Pioneer Investments in Boston, said a rise in the dollar in the second half of the year could add momentum to the yen weakness. "The U.S. economy is performing better than expected," said Upadhyaya. "U.S. yields will start to head higher and interest rates differential will move against the yen."
(Read more: Did the Bank of Japan Just Kill the Yen's Rally?)
The dollar was flat at 88.68 yen, retreating from a 2 1/2-year high of 90.25 yen set on Monday, according to Reuters data. It had declined 1 percent versus the yen on Tuesday.