TOKYO, Feb 21 The yen slipped against the dollar and euro as investors questioned whether

TOKYO, Feb 21 (Reuters) The yen slipped against the dollar and euro as investors questioned whether a possible interest rate rise by the Bank of Japan on Wednesday would do much to shore up the struggling Japanese currency.

Market players are divided over whether the BOJ will lift rates to a decade-high of 0.5 percent from 0.25 percent, and traders say the yen could move in either direction depending on what the central bank decides.

But even if the BOJ lifts rates, investors increasingly believe the yen will ultimately suffer with rates so much higher at 5.25 percent in the United States and 3.5 percent in the euro zone, and the BOJ is seen likely to take a while before tightening policy further.

''It seems like it's 50-50... I don't think there are too many people who are trying to factor in the outcome with any certainty,'' said Kikuko Takeda, currency strategist at Bank of Tokyo-Mitsubishi UFJ.

Takeda, who thinks the BOJ will probably raise rates on Wednesday, or possibly in March, said any gains in the yen were likely to prove fleeting.

''Many traders think the yen will weaken over the medium to long term... I doubt that the yen will be able to stay near any highs for long,'' Takeda said.

Traders said the dollar was likely to find support near last Friday's five-week low of 118.98 yen even if the BOJ raises interest rates on Wednesday.

The dollar stood at 120.24 yen as of 0118 GMT. It had traded at 120.03 yen on electronic trading platform EBS in late U.S.

trading on Tuesday.

The euro rose to 158.10 yen up from around 157.70 yen in late U.S. trading on EBS. The euro was up slightly at $1.3146.

The dollar is seen likely to rise against the yen if the BOJ holds rates steady.

But market players say its gains could be gradual, since the dollar is still smarting from weak U.S. economic data last week and comments from Federal Reserve Chairman Ben Bernanke that stirred expectations the Fed may start to cut rates later this year.

If the BOJ holds rates steady, investors will likely shift expectations toward a rate rise in March, said Bank of Tokyo-Mitsubishi UFJ's Takeda.

Some investors, however, may question whether there will be enough upturn in consumption and consumer inflation related data in the next month to justify an increase at that time, and there may also be doubts about whether the BOJ would be able to raise interest rates too close to the end of the business year at the end of March, Takeda said.

In January, the BOJ policy board decided to keep interest rates unchanged by a 6-3 vote -- the closest vote on a key monetary policy decision in more than three years.

Gross domestic product data last week showing the Japanese economy expanded at a robust annualised pace of 4.8 percent in the last three months of 2006 has helped keep alive the possibility of a move this week.

REUTERS PDS VP0752