By Kanako Chiba and Mari Murayama
Tokyo, Dec. 11 (Bloomberg) -- The yen, little changed, may fall to an eight-month low month low against the dollar on concern the Bank of Japan's Tankan report tomorrow will show the nation's largest manufacturers expect a recession to get worse.
The Japan's currency traded at 125.97 against its U.S. counterpart, from 126.02 in New York yesterday, when it reached its weakest level since April. Against the euro, it was at 112.26 yen from 112.22 in New York.
The Tankan index of business confidence among manufacturers will probably drop to minus 44, the lowest level in almost three years, after declining to minus 33 last quarter, according to the median of 33 forecasts in a Bloomberg News survey of economists.
``Japan's outlook is grim,'' Koichi Takenaka, a foreign exchange manager at the Industrial Bank of Japan Ltd. The yen is likely to fall below 130 in coming months said as the nation works through its third recession in a decade, he said.
The Tankan report follows a release yesterday that showed Japanese companies unexpectedly slashed orders for machinery and equipment in October.
``Even if the report comes in as expected, it's bad for the yen,'' said Tadatoshi Taso, a foreign exchange manager at Bank of Tokyo-Mitsubishi Ltd. A lower-than-expected reading may send the yen beyond 127, he said. U.S.
The U.S. economy may get a boost later today as the Federal Reserve meets amid expectations it will lower interest rates to spur confidence in the economy and restore growth.
``What we are focusing on is the statement to get ideas of the state of the economy and future interest-rate reductions,'' Taso said.
The Fed has cut rates 10 times this year, bringing its target for overnight bank lending, a benchmark for other interest rates, to a 40-year low of 2 percent. Forty-three of the 57 analysts surveyed by Bloomberg News expect the Fed to lower rates by at least 25 basis points later today.
Meantime, Japanese government officials are sending mixed signals on where they want the yen to go.
Vice Finance Minister Toshiro Muto voiced concern yesterday about the speed of the currency's drop. The yen is down 4.4 percent against its U.S. counterpart over the past month.
``The government will take necessary action when the currency market fluctuates too rapidly,'' Muto said.
Haruhiko Kuroda, vice finance minister for international affairs, earlier yesterday signaled he doesn't oppose the currency's decline.
In other trading, the dollar was traded 1.6630 Swiss francs from 1.6624 in New York. Against the British pound, it traded at $1.4331 from $1.4359.