The yen recovered lost ground against the dollar on Wednesday after China said it would discuss its currency at next week's Group of Seven meeting, rekindling speculation of a yuan revaluation.
A Chinese official said that the country's finance minister would attend the meeting of G7 policymakers in London and there would be a "deep dialogue" on issues including the yuan, which China has pegged to the dollar for the last decade.
The Japanese yen is extremely sensitive to comments from China since any revaluation of the yuan would put upward pressure on all Asian currencies.
"We've had some conflicting signals in the last 24 hours on China," said Daragh Maher, senior currency strategist at Calyon. "Yuan revaluation will be a topic of discussion at G7, but whether we will actually get some change of language on the yuan is questionable."
The dollar was down 0.6 percent at 103.40 yen at 6 a.m. EST. The greenback gained 1.5 percent against the yen on Tuesday after a senior Chinese official suggested a revaluation could be further away than many expect.
"What was important yesterday is already history today," said one trader, noting a large amount of speculative money was being shifted around on the prospect of a Chinese revaluation.
The euro was 0.3 percent weaker at 134.56 yen, but stronger against the dollar after an upbeat survey on German business sentiment.

GERMAN SENTIMENT BRIGHTENS
German business morale rose to its highest level in 11 months in January as firms' expectations brightened on signs of stronger domestic demand, the Ifo economic institute said earlier on Wednesday.
The survey's headline index rose to 96.4 from 96.2 in December, beating economists' forecasts which had centerd on a slight pullback to 96.0.
The euro pushed above $1.30 after the survey to stand 0.3 percent higher on the day.
"The improved expectations indicate a continuation of the upswing, supported by somewhat stronger domestic demand," said Ifo president Hans-Werner Sinn.
Separate data showed the euro zone's current account surplus rose to 3.2 billion euros in November from a revised 1.2 billion surplus in October.
Sterling also put in a strong performance after data showed Britain's economy grew faster than expected in the fourth quarter. Britain's gross domestic product grew 0.7 percent in the quarter compared with 0.5 percent in the July-September period.
Sterling was up more than half a percent at $1.8762, and gained more than a third of percent against the euro.
Minutes from the Bank of England's policy meeting earlier this month showed a unanimous vote to leave interest rates unchanged.
"Growth was stronger than expected and shows a nice rebound after a poor third quarter," said Lorenzo Codogno, economist at Bank of America, said, adding that British rates were likely to remain unchanged for some time.