The euro, meanwhile, advanced against the dollar, gaining after two days of losses, as a strong bond auction in Spain and Portugal's possible return to the fixed-income market appeased worries about the region's three-year-old debt crisis.
The dollar and euro, however, gained significant value versus the yen after sinking for two straight sessions, returning to a trend that has been in place for several months.
Citing sources familiar with the central bank's thinking, Reuters reported on Thursday that the BoJ next week will consider removing the 0.1 percent floor on short-term interest rates and commit to open-ended asset buying until the 2 percent inflation target is reached.
"The report just confirms expectations of aggressive easing by the BoJ at next week's policy meeting," said Greg Moore, currency strategist at TD Securities in Toronto. "It's pretty dovish for the yen and that's why we have seen the yen hit new lows against the dollar and euro."
The dollar rose as high as 89.91 yen and last traded at 89.79, up 1.6 percent, marking the biggest rise since late October 2011 when the pair notched gains of more then 3 percent after official BoJ intervention.
TD's Moore said it's difficult to pick a top on dollar/yen given how fast the appreciation has been for the pair. But he noted that based on technical charts, there is a head and shoulders pattern evident at the 92-93 yen level.
The yen had fallen earlier fell in Asian trade after Japan's Economics Minister Akira Amari was quoted as saying that his remarks on Tuesday about the negative impact of excessive yen weakness had been misinterpreted.
On Tuesday, he had said a weak yen could hurt the livelihood of people by boosting import prices.
The euro soared as high as 120.31 yen, its highest since May 2011. It last traded at 120.23, up 2.3 percent, on pace for its best daily gain in about a week.
It has so far been a banner year for the greenback and euro versus Japan's currency, notching a nearly 3.2 percent and around a 4.4 percent gain, respectively. The impressive appreciation follows dollar/yen and euro/yen gains of about 11.3 percent and roughly 14.3 percent in the fourth quarter.
Strategists said increasing bets on aggressive policy easing by the Bank of Japan would continue to drag the yen lower before policymakers meet on Jan. 21-22, when it is widely expected to adopt a 2 percent inflation target and perhaps extend the current asset purchase program.
But the yen could rebound if the Bank of Japan falls short of matching market expectations for implementing a very loose monetary policy.
The dollar, meanwhile, pared gains against the yen after US data showed factory activity in the US mid-Atlantic region unexpectedly contracted in January.
The US data was a surprise for currency investors after better-than-expected numbers on jobless claims and housing starts.
EURO RALLIES
An improved appetite for risk emerged after a solid bond auction from debt-burdened Spain. The auction results buoyed the euro, which last traded at $1.3380 against the dollar, up 0.7 percent on the day.
The euro is up 1.4 percent against the dollar so far in 2013, largely due to growing optimism about the euro zone after surprisingly upbeat comments from European Central Bank President Mario Draghi last Thursday.
The next important event for financial markets is Chinese data on Friday. Should the world's second-largest economy show strength, riskier currencies, such as the Australian dollar, should rally.
The euro last traded at $1.3380, up 0.7 percent on the day, but below Monday's 11-month high of $1.3403, according to Reuters data.