Nov. 21 (Bloomberg) -- The yen may weaken as minutes of the Bank of Japan's policy meeting in October stoked speculation it will delay raising interest rates until next year.

The economy is ``likely to expand moderately'' and rates will be ``gradually'' pushed higher, said the minutes, released today. The yen has fallen against 15 of the 16 most-active currencies tracked by Bloomberg since the central bank lifted borrowing costs for the first time in almost six years on July 14, as investors cut bets on a second increase this year.

``The BOJ is losing some confidence in its desire to raise interest rates,'' said Tim Fox, a currency strategist at Dresdner Kleinwort in London. Prospects for the yen rising against the dollar ``seem to be relatively slim,'' Fox added.

The yen traded at 151.25 per euro at 7:38 a.m. in New York, compared with 151.27 late yesterday. It reached a record low of 151.67 yesterday. The currency was at 118.03 against the dollar from 118.05. The euro traded at $1.2815, from $1.2816.

After pushing beyond 151.50 per euro yesterday, the yen will stay around those levels today, Fox said. The yen has dropped 1.7 percent versus the dollar since the BOJ's July rate increase.

The central bank will raise borrowing costs as long as the economy and prices continue to develop according to its outlook, members of the policy board said, according to the minutes of the Oct. 12-13 meeting released in Tokyo.

The benchmark overnight rate is 0.25 percent. The Federal Reserve has left rates unchanged for the past three months at 5.25 percent, after two years of increases. The European Central Bank has lifted rates five times since December, to 3.25 percent.

Yen's Record Low

The yen fell yesterday after central bank Governor Toshihiko Fukui said Japan doesn't face an immediate inflation threat. Lower borrowing costs in Japan have encouraged investors to sell yen for higher-yielding currencies.

``The possibility of a January rate hike is increasing but you cannot factor in further increases,'' said Kazuyuki Takami, a manager of the currency trading department at Bank of Tokyo- Mitsubishi UFJ, a unit of Japan's largest lender by assets. ``Japanese investors will steadily seek overseas assets with higher yields.'' The yen may move between 117.50 and 118.80 against the dollar this week, Takami said.

The currency may also decline on speculation the government, led by Prime Minister Shinzo Abe, will downgrade its view of the economy for the first time in almost two years in its November monthly review, according to a Nihon Keizai newspaper report.

The government plans to modify its overall assessment of the economy from ``recovering'' to ``recovering with signs of weakness in consumer spending,'' or ``slowly recovering,'' the Nikkei report said, without saying where it got the information. It will be the first revision down in 23 months, the paper said.

View of Economy

``This would be a blocking move by the Abe administration to prevent the BOJ from having any leeway in raising rates,'' said Matthew Johnson, a strategist at Forecast Ltd. in Sydney. ``This would give me confidence to sell the yen.''

The currency will decline to 120 yen against the dollar in the next three months, he forecast.

Some policy makers suggested the bank is leaving the door open to an increase in rates this year. Toshiro Muto, a deputy governor, said officials will watch price and economic conditions closely and ensure that a rate decision is made neither too early nor too late, Jiji Press reported, citing an interview.

``I see an even chance'' of the bank raising by year-end, said Koichi Kano, a currency trader in Tokyo at Citigroup Inc.

Japan's currency may move between 117.60 and 118.60 per dollar this week, Kano said.

The euro may gain after ECB President Jean-Claude Trichet, in Sydney, called for ``alertness'' on inflation, suggesting rates will keep increasing next year. At a briefing in Melbourne yesterday he said investors need to be ``strongly vigilant'' about the risk of inflation because of dynamic global growth.

``I expect people will test the euro's upside, especially against the yen,'' said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of Brown Brothers Harriman. The euro may climb to $1.2850 and match its record of 151.67 yen today, Kubo said.

To contact the reporters on this story: Kabir Chibber in London at kchibber@bloomberg.net; Chris Young in Sydney at cyoung12@bloomberg.net

Last Updated: November 21, 2006 07:42 EST