The euro hit a record high versus the yen this morning as investor expectations that the single currency's interest rates will continue to rise put Japan's low-yielding currency under broad selling pressure.
The euro rose to 160.18 yen, the highest level since its launch in 1999.
The yen was also hit by a surprise drop in Japanese core machinery orders in February, which cast some doubt on the outlook for capital spending.
The European Central Bank is expected to hold rates steady at 3.75 per cent at its meeting this week, but investors expect a rate rise this quarter.
But despite an appetite among Japanese investors to pick up the euro and the dollar at a bargain against the yen, wariness ahead of this weekend's Group of Seven meeting was likely to limit significant gains, some analysts said.
G7 officials have said in the past that yen weakness runs counter to Japan's economic recovery and warned investors they could get burned making one-way currency bets.