Wage growth, due at 0930 GMT, is likely to be subdued while the BoE report could lower near term inflation forecasts. That would suggest rates will stay lower for longer and keep sterling under pressure, traders said. The dollar, which had popped above 116 yen earlier in Asia, was down 0.4 percent at 115.35. It had risen to 116.11 yen on Tuesday - a high not seen since October 2007.
The yen has come under pressure on growing expectations that Abe will postpone a sales tax hike - seen as positive for growth and Japanese stocks - and call an election next month. If he wins, a second round of reflationary policies may follow. "The Nikkei backed off from highs and so has dollar/yen," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "A snap election is likely to generate greater support for Abe and his policies and keep the bias for yen weakness." The Nikkei has an inverse relation to the yen, so anything positive for stocks has an opposite effect on the yen.
A comment by Japanese government spokesman Yoshihide Suga that it is up to Abe to decide whether to call an election dampened speculation about a snap poll and helped pull the yen off its lows, but dollar losses were expected to be limited. "There were concerns towards a political vacuum forming and Suga's comments prompted traders to buy back the yen," said Takako Masai, head of markets research department at Shinsei Bank in Tokyo.
Newspaper Sankei, citing unnamed government and coalition officials, said Abe would delay a planned second sales tax increase by a year and a half and take the issue to voters. The BoE's inflation report is due at 1030 GMT. Any dovish comments from BoE chief Mark Carney could push back into late 2015 the market's estimate of when the first rise in interest rates will come, and hurt sterling. Sterling was steady at $1.5927, having hit a 14-month low of $1.5791 on Friday.