* Dollar/yen resistance at 100 yen still strong
* BOJ holds rates, Japanese inflation weak
* U.S. Q1 GDP due at 1230 GMT
* Economic growth seen strong but concerns about Q2
By Jessica Mortimer
LONDON, April 26 (Reuters) - The dollar fell against the yen on Friday, retreating further from a four-year high after the Bank of Japan left policy unchanged but potentially in line for a brief lift if data shows strong U.S. economic growth.
Figures due at 1230 GMT are expected to show the economy grew at a 3.0 percent annual rate in the first quarter.
But any dollar gains were expected to be limited, given concerns that automatic government spending cuts will harm the U.S. recovery in the coming months.
“Strong U.S. GDP should help the dollar to rise against the euro and the yen, but this can be considered old data and the main challenge will be the second quarter,” said Asmara Jamaleh, currency strategist at Intesa Sanpaolo in Milan.
The dollar inched up against the euro but was down 0.5 percent at 98.68 yen, pulling further away from a four-year high of 99.95 hit on April 11.
Aggressive monetary stimulus announced by the BOJ in early April triggered a sharp sell-off in the yen, but traders and analysts said the dollar’s failure to breach 100 yen left it vulnerable to a pullback.
The BOJ held off from announcing new monetary initiatives on Friday, while policymakers were divided over whether the central bank can meet its target for 2 percent inflation in two years.
“The failure at 100 yen has focused people’s minds on whether they may have been too optimistic on the near-term prospects for the yen,” Rabobank senior currency strategist Jane Foley said.
“Today’s inflation data suggested the market may have got ahead of itself in its optimism that monetary stimulus will create enough activity in the economy to push up inflation.”
Data showed the fifth straight month of annual declines in Japanese core consumer prices in March, despite the weaker yen.
Intesa Sanpaolo’s Jamaleh said the dollar could be stuck in a range between 95 and 100 yen for the next few weeks. She expected it would eventually break 100 but said gains would be limited, keeping it below 105 yen.
There are concerns about the U.S. economic outlook after signs that economic activity softened in March and early April.
“U.S. GDP is likely to be a healthy, robust number and this might give the dollar some support. But the market is looking ahead to the second quarter and there are perceptions that there could be another spring slump,” Rabobank’s Foley said.
She said concerns were creeping in that the market may have got ahead of itself in predicting the Federal Reserve would soon slow its quantitative easing programme.
The euro was down 0.1 percent at $1.2997, staying close to a near-three-week low of $1.2954 hit on Wednesday, with traders reporting selling by a hedge fund.
The common currency was expected to stay under pressure in the coming days on expectations the European Central Bank will cut rates next week to support the euro zone’s fragile economy.
“If the ECB cuts rates this should weaken the euro and bring it below $1.30, lowering its trading range to between $1.25 and $1.30,” Intesa Sanpaolo’s Jamaleh said.