FOREX-Dollar near 4-year high vs yen as BOJ doubts build

TOKYO, Jan 30 (Reuters) - The dollar held near a four-year high against the yen on Tuesday as data showing soft consumer spending in Japan stirred more doubts about whether the Bank of Japan will lift interest rates next month.

Japanese household spending fell a surprisingly big 1.9 percent in December, casting some doubt on whether consumption recovered in the fourth quarter as much as economists had originally expected.

Another report showed that capital spending is still helping offset tepid consumer spending, with industrial production rising 0.7 percent in December from the previous month, more than double forecasts for a 0.3 percent increase.

Analysts said the robust output figures would likely not be enough for the BOJ to make a case for raising rates, especially after the central bank kept rates on hold this month in a decision that was seen as bowing to government pressure.

"These data are negative for the yen," said Toru Umemoto, chief FX strategist at Barclays Bank in Tokyo.

The yen has suffered across the board as soft readings of consumer spending and prices have cast doubt on whether the BOJ can lift rates to 0.5 percent from the current 0.25 percent, the lowest among industrialised countries.

The dollar edged down to 121.65 yen JPY= from near 121.75 yen in late New York trade but held near the peak of 122.20 yen struck the previous session -- its strongest since December 2002.

The euro drifted sideways at 157.75 yen EURJPY=R, just off the record high of 158.62 yen struck last week.

The single currency edged up to $1.2965 EUR= from $1.2957.

European finance ministers voiced worries about the yen's broad weakness on Monday and said the currency's woes would be raised as the Group of Seven meeting in Germany next month, but the comments were generally brushed aside.

Jean-Claude Juncker, chairman of the Eurogroup of finance ministers, said the yen should reflect the economy's recovery. "We don't like this volatility of the exchange rate," he said.

Japanese officials have said they have not heard that the yen's weakness would be a topic at the G7 gathering.

The dollar has rebounded against other major currencies as the mounting signs of strength in the U.S. economy have prompted investors to scale back expectations for the Federal Reserve to cut interest rates this year.

With the Fed seen more likely to keep rates at 5.25 percent for a while longer, the dollar has benefited from its yield advantage over the euro and yen.

The Fed wraps up its first policy meeting of the year on Wednesday and is expected to repeat that it is still worried about inflation pressures.

A slew of indicators will also reflect the U.S. economy's health, including fourth-quarter gross domestic product on Wednesday as well as January readings of manufacturing and the labour market.