* BOJ expected to hold steady but could hint at more easing to come
* Japan GDP contracts on Oct-Dec, building case for more easing
By Ian Chua and Lisa Twaronite
SYDNEY/TOKYO, Feb 14 (Reuters) - The yen slipped against the dollar and euro on Thursday as investors awaited a Bank of Japan policy decision later in the session, as well as a meeting of Group of 20 nations in coming days, for signals on how long the yen's weak trend might last.
While the BOJ is expected to keep monetary policy steady, it is also likely to underscore its readiness to expand monetary stimulus again if risks to the outlook heighten.
The dollar traded at 93.47 yen, up 0.2 percent and moving back toward a 33-month high of 94.465 set on Monday. The euro stood at 125.74 yen, up about 0.2 percent and moving closer to a 34-month peak of 127.71 scaled a week ago.
Data released earlier on Thursday showed Japan's economy contracted for the third consecutive quarter in October-December, adding weight to the new government's push for radical policy steps to revive growth and whip deflation.
Many analysts and market participants expect the BOJ to stand pat until the first rate review under its next governor, scheduled for April 3-4. BOJ Governor Masaaki Shirakawa will leave together with his two central bank deputies three weeks ahead of the end of his five-year term, clearing the way for slightly earlier implementation of aggressive monetary easing under his successor.
"This leaves the risks that the BOJ actually does positively surprise the market. Nonetheless, it may be more prudent to wait and buy USD/JPY on the 90 handle, as the risk trade is somewhat stretched," analysts at Societe Generale wrote in a note.
Since November, the dollar has soared around 20 percent on the yen, while the euro has gained about 25 percent, as the BOJ came under relentless political pressure to deliver aggressive stimulus steps.
Markets turned nervous this week ahead of the BOJ meeting as well as a two-day meeting of G20 finance ministers and central bank officials starting on Friday, due to concerns that Japan could come under pressure from international peers unhappy with the steep fall in the yen.
On Thursday, South Korea's central bank explicitly cited "the new Japanese government's expansionary policy operations" as one of the "potential uncertainties" to South Korea's growth path.
A G7 statement, designed to cool international currency tensions, caused some market confusion after Japan said the statement condoned its reflationary policy, while a G7 official suggested otherwise.
Summing up the frustration, the Bank of England chief on Wednesday said the G7 statement should be taken at face value and anonymous officials should not try to reinterpret it.
Against the dollar, the euro was steady at $1.3450 after earlier rising to a one-week high of $1.3520. Resistance is seen around $1.3530, the 50 percent retracement level of its Feb 1-11 fall.
Underpinning the euro, data on Wednesday showed output at euro zone factories rose for the first time since August at the end of last year, a sign the single currency bloc was slowly starting to pull out of recession.
"Some investors are confused as to the future course of the euro, since its recent rise wasn't due so much to fundamentals," said Kimihiko Tomita, head of forex at State Street in Tokyo.
Commodity currencies fared well with the Australian dollar rising to a one week high of $1.0370, pulling away from a four-month trough of $1.0222 plumbed on Tuesday.