FOREX-Yen claws higher on buybacks, focus on Japan election
* Dollar slips vs yen on long liquidation
* Drop in Tokyo shares leads to position squaring
* Near term focus on Japan election on Sunday
SINGAPORE, July 19 (Reuters) - The yen rose on Friday as investors squared their books ahead of Japan's upper house election this weekend, which could clear the legislative path for Prime Minister Shinzo Abe's aggressive economic reform drive.
Recent opinion polls have shown that Abe's ruling bloc remains on track to take a hefty majority in the upper house, putting an end to a "twisted parliament" in which the opposition controls the upper chamber.
That result would give Abe more freedom to push his agenda to revive the economy through decisive monetary easing, public spending and structural reform, and could keep the yen on the defensive.
The market has probably factored in the likelihood of Abe's ruling bloc gaining a majority in the upper house, and such a victory for Abe is unlikely to alter prevailing market patterns, said Junya Tanase, chief FX strategist for JPMorgan Chase in Tokyo.
"I don't think there will be any direct reaction in that case, but a trend toward higher share prices and a weaker yen will probably continue," he said.
The dollar fell 0.4 percent versus the yen to 100.08 yen , having pulled back from an intraday high of 100.87 yen hit earlier in the session.
However, the greenback is still up more than 15 percent against the yen on the year.
The yen has been weakened by the Bank of Japan's drastic monetary expansion, while the dollar has been supported by expectations that the U.S. Federal Reserve could start scaling back its monetary stimulus later this year.
A trader for a Japanese bank in Singapore said market players seemed wary of putting bearish bets on the dollar against the yen ahead of Sunday's election.
"I am not seeing or hearing anyone going short (the dollar) into the weekend or wanting to," the trader said.
With expectations so high, anything less than a sweeping victory by the ruling bloc, which consists of Abe's Liberal Democratic Party (LDP) and junior coalition partner New Komeito, could lead to disappointment and lift the yen, market players say.
The dollar initially pushed higher versus the yen on Friday, with one Tokyo-based trader saying the rise was partly caused by demand for dollars at the 0100 GMT Tokyo fixing. Such demand is often a result of dollar-buying by Japanese importers.
Traders said the dollar later slipped back from its intraday high after Japan's Nikkei share average reversed from its early rise to an eight-week high, and fell by as much as 2.7 percent.
Such falls in equities can increase risk aversion, and spark demand for the yen - a traditional safe-haven currency.
The euro eased 0.2 percent against the yen to 131.41 yen . Earlier on Friday, the euro hit a seven-week high of around 132.10 yen on trading platform EBS.
Against the dollar, the euro edged up 0.2 percent to $1.3136 .