* Japanese official says yen decline not over * Japan posts record trade deficit for 2012 * Sentiment on euro zone assets improving By Gertrude Chavez-Dreyfuss NEW YORK, Jan 24 The yen slumped across the board on Thursday after three days of gains, after a Japanese economic official said the government has no problem with the dollar hitting 100 yen and after Japan reported a record trade deficit. The euro rose against the dollar after economic data from Germany indicated that the worst of the euro zone debt crisis may have passed. But it was the yen that drew the most attention. Traders cited reports quoting Japan's deputy economy minister, Yasutoshi Nishimura, as saying the yen's decline is not over and a dollar/yen level of 100 would not be a concern. Nishimura was also quoted saying that only if the dollar rises to 110-120 yen would it add to domestic import costs. Nishimura "represents another official voice favoring further yen weakness, and the remarks probably supported the latest bounce in dollar/yen which began overnight," said Bob Lynch, chief currency strategist at HSBC in New York. "At some stage, the ability of this jaw-boning and verbal intervention to drive the yen lower will become subject to diminishing returns, but that does not appear to be the case yet." The dollar was last up 1.6 percent at 89.99 yen, a day after hitting a one-week low of 88.06 yen. The greenback climbed past the resistance point of 90 yen and could possibly reach 90.25 yen, the 2-1/2-year high hit on Monday. Comments by Japanese Prime Minister Shinzo Abe that he expected the Bank of Japan to achieve its 2 percent inflation goal as soon as possible drove another nail into the yen. A record trade deficit for Japan in 2012 of 6.297 trillion yen ($78.24 billion) didn't help the yen's cause either, adding to selling pressure. The yen had rebounded earlier this week after the BoJ disappointed investors who were expecting an immediate increase in its asset-purchasing program. Still, the BoJ delivered its most aggressive policy easing yet to snap the economy out of years of stagnation. "Yen selling will persist for some time. Even though the BoJ disappointed investors with their easing steps, if they do as they say, then it will result in a weaker yen," said Aroop Chatterjee, currency strategist at Barclays Capital in New York. EURO GAINS The euro saw choppy trade after private sector activity data highlighted the diverging fortunes of the bloc's biggest economies. Weak performance in France was offset by numbers out of Germany showing that its private sector expanded at the fastest rate in a year. "The better PMI reading suggests a euro zone economy that is starting to stabilize," Barclays' Chatterjee said. "It's not out of the woods yet, but the economic and financial conditions are certainly better now than last year." Traders said macro funds and asset managers were buying the euro, and if data continued to show prospects for the region were improving, the currency could rise further. The euro was up 0.4 percent against the dollar at $1.3374, not far from the 11-month high of $1.3404 hit on Jan. 14, which is also acting as near-term resistance. Support was cited at $1.3250, near lows touched on Jan. 11. The euro was up 2 percent against the yen at 120.36 yen, inching toward a 20-month high of 120.73 yen hit on Friday. Traders cited Asian central banks as main buyers of the euro as they stepped up yen selling. Some analysts said the announcement on the size of next week's first repayments of cheap three-year loans taken by banks from the European Central Bank just over a year ago could give the euro a bit of a lift. Banks took more than 1 trillion euros in the long-term refinancing operation loans from the ECB. A Reuters poll showed traders expected about 100 billion to be paid back next week. Option traders reported strong demand for euro calls - bets that the euro will rise - for expiry on Friday.