The yield advantage offered by two-year U.S. debt over Japanese bonds held near the highest since May 2001. A Ministry of Finance report tomorrow may show Japanese investors were net buyers of overseas assets for an 11th week, during which time the yen has weakened 7.8 percent.

``Japan's money is flowing into foreign-currency denominated assets such as dollars, where returns are higher,'' said Michiyoshi Kato, vice president of foreign-exchange sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest lender by assets. ``Winter bonus season is also encouraging yen-selling.''

The yen was at 120.63 per dollar at 8:35 a.m. in Tokyo, from 120.88 late yesterday in New York, according to electronic currency-dealing system EBS. on Dec.5 It fell as low as 121.39, the weakest since March 21, 2003. The yen was at 142.25 per euro, from 142.39. It yesterday declined to 142.81, the lowest since the euro was introduced in 1999. The dollar was at $1.1793 versus the euro, from $1.1779.

The yen will move between 120.50 and 121.50 against the dollar, and 141.80 and 142.80 per euro today, Kato said.

Workers in private companies are expected to receive winter bonuses of 442,000 yen ($3,663) per person, up 2.7 percent from a year earlier, according to UFJ Institute Ltd.'s data published Nov. 8.

The Japanese currency is poised for the biggest annual loss since 1979 as the Federal Reserve raised interest rates seven times this year and the Bank of Japan has held rates near zero since 2001. The European Central Bank on Dec. 1 raised its benchmark rate for the first time in five years, to 2.25 percent.

The difference in yields between Japan's two-year government notes and similar maturity U.S. debt was 4.20 percentage points yesterday, 0.01 percentage point below its widest since May 2001.