The dollar gained Friday on expectations that stronger economic growth in Japan will boost domestic investors' risk appetite and lead to more buying of overseas assets, weakening the yen. The dollar was trading at 118.01 yen in Tokyo midafternoon, up 0.33 yen from late Thursday in New York. The euro fell to $1.1884 from $1.1887. Japan said Friday its economy in the fourth quarter expanded at an annual pace of 5.5 percent, topping analysts' forecasts and marking the fourth straight quarter of growth. A positive reading about an economy tends to lift that nation's currency, and the dollar initially dipped in early trading. But Japanese institutional investors then began buying the dollar on expectations that Japanese investors will feel more confident about the domestic economy and increase their risk appetite for foreign assets. The dollar momentarily hit a one-week high of 118.28 yen. "Last year foreign investors piled a lot of money into Japanese stocks, but now times have changed," said Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co. "This year money will flow out of Japan because investors will take on more risks as long as the economy remains strong," he said, adding that the dollar could jump to as high as 121 yen in the next few months. Friday's Cabinet Office data also showed that deflation in Japan had not abated. Views are now mixed on when the Bank of Japan may shift policy. Some investors believe the strong GDP reading will prompt swifter change, but others believe the central will move cautiously. "The BOJ will be slow to end quantitative easing, because it's constrained by the government's deflation-fighting plan," said Paul Sheard, Chief Economist for Asia at Lehman Brothers. "I believe we're not looking at April or May this year, but September."