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TOKYO, July 14 (Reuters) The yen fell against the dollar and the euro on Friday on expectations that the Bank of Japan would raise interest rates only slowly after a widely expected increase from zero later in the day.

At the end of its two-day meeting, the central bank is forecast to boost the overnight call rate to 0.25 percent, the first hike in six years and ending an era of zero rates aimed at fighting off deflation.

But such an outcome would not likely prompt big buying of the yen, traders said, because the gap between Japanese rates and those in the United States and the euro zone would remain huge, favouring the dollar and the euro.

''Market players know that yield gaps will not narrow much even after the BOJ ends its zero-rate policy,'' said a trader at a big Japanese bank. ''Many investors want to buy the dollar given the yield difference.'' After the BOJ rate decision, investors will tune in to comments from Governor Toshihiko Fukui at his post-meeting news conference at 0630 GMT at which he is expected to stress that rates will rise only gradually.

''The yen is likely to face selling if Fukui says further tightening will be slow,'' said Kota Kimura, currency trading manager at Shinkin Central Bank. ''A rate hike today won't be reason enough to buy the yen against the dollar.'' Further losses in Tokyo stock prices also prompted selling of the yen, traders said.

The Nikkei stock average fell more than 1 percent to below 15,000 for the first time in two weeks on concerns record oil prices.

By 0245 GMT, the dollar was up nearly half a percent at 115.85 yen, just off the two-week high of 115.90 yen struck earlier on electronic trading platform EBS.

The yen had risen at the start of the week to a one-month high of 113.45 yen on EBS as traders raised bets for a quarter percentage point rise.

The euro slipped to $1.2675 from $1.2690 in late U.S. trade, well off a one-month high of $1.2865 touched last week. The euro was up 0.3 percent at 146.90 yen, in sight of the record high of 147.42 yen hit last week.

After the market digests the BOJ's decision and Fukui's comments, it is likely to shift attention back to the dollar's yield advantage, traders said.

For clues about the outlook for U.S. rates, investors will look to U.S. retail sales data for June due at 1230 GMT and the University of Michigan's consumer sentiment index for July slated to land at 1345 GMT.

The Federal Reserve lifted its funds rate for the 17th straight time to 5.25 percent last month and some expect the central bank to hike again in August.

The European Central Bank is also expected to boost its key rate next month to 3 percent.

REUTERS CS RK1141