Yen dips after tankan doesn't alter rate view

TOKYO, Dec 15 (Reuters) The yen edged down on Friday after the Bank of Japan's tankan survey showed improved business sentiment but failed to alter expectations that the BOJ will keep interest rates on hold next week.

The tankan's headline diffusion index for large manufacturers came in at a two-year high of plus 25, up from plus 24 in the previous survey in September and matching the median forecast of economists in a Reuters survey.

''It was in line with expectations. I don't think the numbers were bad,'' said Kazuhiro Kaneko, a manager at Mizuho Trust & Banking's treasury department.

The tankan, which also showed that business sentiment among big non-manufacturers improved to the best level in 15 years, underscored market expectations for the central bank to raise rates in coming months.

But traders and analysts said the data didn't pack enough punch to alter expectations that the BOJ would hold off from raising rates at its two-day policy meeting that ends on Tuesday.

The yen initially had a subdued reaction to the tankan, but was pushed lower, possibly due to yen-selling flows related to the launch of investment trusts, said Kaneko at Mizuho Trust.

By 0135 GMT, the dollar stood at 117.95 yen, up from around 117.75 yen just before the tankan was released. It was around 117.85 yen in late U.S. trading on Thursday.

The euro rose to 155.05 yen from around 154.95 yen before the tankan.

Against the dollar, the euro was little changed at $1.3145.

Some soft Japanese indicators including a smaller-than-expected rise in machinery orders in October have raised doubts about the strength of the economy and prompted investors to scale back expectations for a BOJ rate rise to 0.50 percent by year-end.

REUTERS DKS PM0716