* Yen sags on expectations for BOJ easing and fiscal spending
* Japan stimulus package to be over Y28 trln -PM Abe quoted
* Dollar/yen in choppy trade on Japan-related headlines
* Japan MOF denies it is considering a 50-year bond (Adds Jiji report on stimulus, adds analyst comment)
By Masayuki Kitano
SINGAPORE, July 27 (Reuters) - The yen fell on Wednesday, pressured by expectations of further monetary easing by the Bank of Japan and amid media reports that the Japanese government will soon unveil a $265 billion stimulus package.
Trading in the yen was choppy, with traders taking cues from various headlines regarding Japan’s economic stimulus package.
The yen fell after Japan’s Fuji TV said Prime Minister Shinzo Abe was planning to announce a stimulus package with a headline figure of around 27 trillion yen.
Abe was later quoted by Jiji news agency as saying the stimulus package, to be announced next week, would total more than 28 trillion yen ($265.48 billion), including 13 trillion yen of “fiscal measures”.
That would be bigger than earlier reports of a possible headline figure of around 20 trillion yen.
“We believe that current expectations are for the fiscal package to be done in conjunction with expanded monetary easing,” said Lee Jin Yang, macro research analyst for Aberdeen Asset Management in Singapore.
“This belief has been causing dollar/yen volatility with the fluctuations in the reported size of the fiscal stimulus.”
The yen extended its drop after the Wall Street Journal reported that Japan was considering issuing 50-year bonds, stirring renewed market speculation about the possibility of debt monetisation, but later pared some losses after the Ministry of Finance denied that it was considering issuing such debt.
The dollar last traded at 105.65 yen, up 1 percent on the day. The greenback had risen by as much as 1.8 percent to 106.54 yen at one point, still some way off a six-week high of 107.49 yen set last Thursday.
The focus now is on the Bank of Japan’s policy decision due on Friday, with expectations running high that the BOJ will expand its monetary stimulus.
“There’s still room for disappointment from the Bank of Japan,” said Stephen Innes, senior trader at FX broker OANDA.
“The market’s really building up expectations...We’ve seen this many times before, these expectations can reverse very quickly,” he added.
Most market players expect the Bank of Japan to announce more easing measures on Friday, including deepening negative interest rates and increasing its purchases of riskier assets such as stocks as well as government bonds.
But many also believe that any additional stimulus is unlikely to trigger a sustained fall in the yen, given that the currency strengthened even after the BOJ’s surprise decision in January to introduce negative rates.
The dollar was steadier against other currencies ahead of the Federal Reserve’s policy announcement later on Wednesday.
Against a basket of six major currencies, the dollar edged up 0.1 percent to 97.248, off Monday’s 4 1/2-month high of 97.569.
Positive U.S. economic data has increased expectations that the Fed could raise rates in December, boosting the relative attraction of the dollar.
Money market futures are pricing in a nearly 50 percent chance of a Fed rate hike by December.
The euro held steady at $1.0989. Against the yen, the euro climbed 1 percent to 116.15 yen. ($1 = 105.4700 yen) (Additional reporting by Hideyuki Sano and Shinichi Saoshiro in Tokyo; Editing by Eric Meijer and Jacqueline Wong)