* Yen poised to end week sharply lower vs major peers
* Markets expecting big LDP win in Japan Sunday election
* Tankan cements hopes of bold action from BOJ next week
* Frustration grows over U.S. 'fiscal cliff' talks
By Hideyuki Sano
TOKYO, Dec 14 The yen slipped to a nine-month low on Friday as expectations grew that the Bank of Japan will step up its money-printing to stimulate the world's third biggest economy after the country's key election this weekend.
Japanese media reported that conservative Liberal Democratic Party (LDP) is set for a stunning victory on Sunday, further cementing speculation that LDP leader Shinzo Abe will be in a strong position to push for bold monetary easing.
"The market is growing confident the next government will be one of the most aggressive about easing that you could think of," said a trader at a Japanese bank.
"Those who had been hoping to buy the dollar/yen on possible dips after the Fed's meeting are now buying the dollar after the dollar didn't fall much," he added.
The dollar bought 83.71 yen, having risen as high as 83.95, a level not seen since March, and within sight of its March peak of 84.187.
The euro also rose to an eight-month high of 109.63 yen , and was on track to end the week almost 3 percent higher on the yen.
The BOJ's tankan survey also showed Japanese business sentiment worsened as expected, bolstering expectations that the central bank will take fresh easing steps at its policy meeting on Wednesday and Thursday.
"We forecast more yen weakness in 2013... eventually, the yen must weaken because the economy needs help so badly," said Kit Juckes, strategist at Societe Generale in London.
Still, option-related flows are putting a brake on the yen's slide for now especially at around 84 yen per dollar and some market players think position-unwinding ahead of the holiday season could set in after key events in the next week.
"Given high expectations, it is hard to think the BOJ will come up with surprises. The BOJ is already buying shares, the only central bank that's doing such things," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
At present, all the expectations about BOJ easing have created "a bit of a festival but the market may be in for a hangover after that," she added.
The dollar found a steadier footing against a basket of major currencies after an initial bout of selling triggered when the Federal Reserve on Wednesday announced fresh bond-buying plan from next year.
The dollar index was little changed at 79.885, having survived a fall to a one-week low of 79.711.
Frustration over the U.S. 'fiscal cliff' talks is giving the greenback a bit of a safe-haven lift as negotiations to avert steep tax hikes and spending cuts between congressional Republicans and the White House hit a wall.
The euro was at $1.3089, almost flat on the day, after having found the going tough above $1.3100. Even news that European governments have clinched a landmark deal on bank supervision and approved long-delayed aid to Greece failed to give the single currency much of impetus.
The Australian dollar also recoiled to $1.0531, from a three-month peak of $1.0585 set earlier in the week, though a small improvement in HSBC's early reading of China's December manufacturing activity helped to underpin the Aussie.
The Aussie has also enjoyed support from foreign central banks. Russia's First Deputy Chairman Alexei Ulyukayev was quoted as saying on Thursday that country's central bank has increased the share of the Australian dollar in its forex reserves to 1.5 percent.
The British pound was off a six-week high hit on Wednesday after Standard and Poor's cut its outlook for UK government debt to negative, putting the country's triple A rating at risk.
It was little changed on the day at $1.6118 but stood below Wednesday's high of $1.6173.