The yen showed little reaction after the Bank of Japan held off from additional monetary stimulus, in line with expectations, after having eased in September and October.
The dollar last traded at 81.28 yen, down 0.1 percent from late US trade on Monday. The greenback was within sight of the previous day's high of 81.59 yen, the dollar's highest level versus the yen since late April.
The yen has slid over the past week on market expectations that a likely new Japanese government after a December election would push the BOJ toward more forceful monetary stimulus, and analysts said the dollar may have more room to rise against the Japanese currency in the near term.
"I think we are going to see new highs," said Todd Elmer, currency strategist at Citi in Singapore, referring to the dollar's outlook versus the yen. "We are going to break out of the topside of the range around 82. The risk is that we could extend a little beyond that point."
It may be prudent, however, to be cautious about selling the yen based solely on BOJ easing expectations, Elmer said.
"Ultimately, the yen is not strong because policy is especially tight in Japan, it's strong because policy is exceptionally easy elsewhere," he said, adding that it remained unclear whether additional BOJ easing would be effective in weakening the yen.
Japan's opposition Liberal Democratic Party (LDP), which has a commanding lead in opinion polls ahead of the election on Dec. 16, has become increasingly vocal in its calls for more monetary stimulus.
Shinzo Abe, the leader of the LDP, has called on the BOJ for bolder policy action, including "unlimited easing", pushing interest rates to zero or below zero and directly underwriting bonds issued to fund public works spending.
In the latest sign of the LDP's stance on monetary policy, the Nikkei newspaper reported that the party is likely to include in its campaign platform a pledge to consider revising a law guaranteeing central bank independence.
While there is the possibility of the LDP toning down its rhetoric after the election, such calls for forceful BOJ easing are likely to persist for now and support the dollar against the yen, said Rob Ryan, a strategist at RBS.
"I don't see a reversal right now," Ryan said, adding that the dollar will probably head into the election a bit higher than where it stands now.
Against this backdrop, the dollar may find support against the yen on any pull-back.
Some Japanese importers and investors may have been caught off guard by the dollar's recent surge against the yen, said a trader for a Japanese bank in Singapore.
"So, downside dips will be bought into," the trader said. At the same time, some traders are looking to sell the dollar if it rises towards 82.00 yen, the trader added.
The euro dipped 0.2 percent to $1.2790, having eased after Moody's cut France's sovereign rating by one notch to Aa1 from Aaa, citing an uncertain fiscal outlook and deteriorating economy.
The single currency's losses were limited, however. Analysts said the downgrade did not come as a surprise, with Standard & Poor's having already downgraded France in January.