Dollar inches down vs yen before BOJ rate call

TOKYO, Dec 19 (Reuters) The dollar edged down against the yen on Tuesday as investors focused on whether Bank of Japan Governor Toshihiko Fukui would signal later in the session a boost in interest rates as soon as January.

With the BOJ widely expected to leave rates at 0.25 per cent at the end of a two-day policy meeting, market players were eager to see if Fukui, at his post-meeting news conference, reinforces expectations for rates to rise early next year.

Investors are looking for a move next month after the central bank's quarterly tankan survey showed sentiment at big manufacturers improving to a two-year high.

Analysts said any suggestion from Fukui of an early rate rise could prompt yen buying because such a move would help erode the yen's yield disadvantage against other major currencies.

''Fukui will likely avoid specifying the timing of a rate hike but will certainly keep expectations alive for it,'' said Nobuo Ibaraki, forex manager at Nomura Trust and Banking.

In early Tokyo trade, the dollar was at 118.05 yen, down slightly from 118.15 yen in late U.S. trade. On Monday, the dollar shrugged off a report showing the U.S. current account gap widened in the third quarter to a record $225.6 billion.

The euro was little changed at $1.3100 and 154.70 yen.

The dollar has risen more than 3 percent against the yen since hitting four-month lows earlier this month after a run of soft Japanese economic data dashed expectations for a rate increase before the year-end.

For clues about the outlook for the U.S. economy and rates, the market will tune in to November readings for producer prices and housing starts, both due at 1330 GMT.

The Federal Reserve said last week that economic growth had slowed over the course of the year, partly reflecting a ''substantial cooling'' of the housing market.

The U.S. Treasury will release its semi-annual report on foreign exchange on Tuesday, days after Treasury Secretary Henry Paulson returned from China with no major breakthrough on the value of the yuan.

Analysts said they were not expecting the U.S. government to name any countries as currency manipulators in the report.

In the euro zone, Germany's Ifo business climate index for December is due at 0800 GMT.

REUTERS PKS BST0710