* Dollar/yen under pressure from profit-taking
* Yen direction hinges on BoJ meeting next week
* ECB's Nowotny reassures market after Juncker comments
* U.S. inflation data does little to sway sentiment
By Julie Haviv
NEW YORK, Jan 16 (Reuters) - The yen rose against the dollar and euro for a second straight session on Wednesday as a recent warning from a Japanese minister about excessive yen weakness continued to buoy the currency.
Forecasts of aggressive action by the Bank of Japan to weaken its currency drove the dollar sharply higher in recent months, with the greenback gaining nearly 11.3 percent in the fourth quarter of 2012 and 2.1 percent so far this year.
However, after the yen hit a 2-1/2 year low of 89.67 this week, most believe it was poised to recoup losses, with a correction ignited by Japanese Economics Minister Akira Amari's comments on Tuesday. Amari cautioned that excessive yen weakness could boost import prices and hurt people's livelihood.
"We are seeing consolidation and repricing of the yen right now, which was to be expected given its sharp move lower since late last year," said Camilla Sutton, chief fx strategist at Scotiabank in Toronto.
"Action by the BoJ is mostly priced in right now, so now the real risk is if the BoJ disappoints next week," she said. "A less-dovish-than-expected BoJ will disappoint expectations and cause the yen to continue moving lower."
Investors have put on big bets against the currency with the new government in Tokyo very vocal about pressing the central bank to tackle deflation, calling for a 2 percent inflation target.
"After next week's meeting, dollar/yen should settle into a new range," Sutton said.
The BOJ is widely expected to agree to such a target at its policy meeting on Jan. 21-22, although some traders said there could be selling in dollar/yen afterwards, based on "buy on the rumor, sell on the fact."
The dollar last traded at 88.54 yen, down 0.3 percent on the day. Traders cited supporting bids at 87.70/80 yen.
The sell-off in dollar/yen dragged all of the major currencies lower.
The euro also fell against the yen to trade down 0.2 percent lower at 117.94. The euro had climbed to its highest in 20 months earlier this week after the European Central Bank dashed expectations of a near-term rate cut.
"What we are witnessing is deleveraging," said Kathy Lien, managing director of FX strategy for BK Asset Management in New York.
"Over the past 2 months, with the blessing of Prime Minister (Shinzo) Abe who pledged to ease monetary policy aggressively, many investors jumped back into yen-funded carry trades and now they are taking profits below key levels after Japanese officials expressed concerns about yen weakness," she said.
The euro held steady against the dollar as soothing comments about the currency's recent strength made by an ECB policymaker was offset by profit-taking and concerns about the region's economy.
The euro briefly bounced after ECB member Ewald Nowotny said the exchange rate was "not a matter of major concern," a strong contrast to comments from Eurogroup head Jean-Claude Juncker, who on Tuesday prompted investors to sell the euro by saying it was "dangerously high."
The euro last traded at $1.3304, flat on the day.
Weak economic data from Europe highlighted the disparity with the U.S. economy.
Demand for new cars in Europe fell to a 17-year low in 2012,
and even the German economy is suffering from the euro zone recession.
If economic data continues to weaken, the ECB may opt to cut rates, a negative for the euro.
Muted U.S. inflation pressures should give the Fed more room to prop up the economy by staying on its ultra-easy monetary policy path. U.S. consumer prices were flat in December.
The euro had rallied smartly in the days following last week's ECB meeting. ECB President Mario Draghi downplayed expectations of another rate cut and painted a more positive outlook for the euro zone economy.
His supportive comments sent the euro to an 11-month high of $1.3403 this week, according to Reuters data.