NEW YORK: The Japanese yen weakened against the dollar on Wednesday after Japan’s prime minister unveiled a surprisingly large $265 billion stimulus package to reflate the world’s third-largest economy, and before the Federal Reserve was due to make a statement on its two-day meeting.

The size of the Japanese package, at more than 28 trillion yen ($265.30 billion), exceeded initial estimates of around 20 trillion yen.

It will also add pressure on the Bank of Japan to match the measures with monetary stimulus when it concludes its meeting on Friday.

“We have some headlines that the stimulus could be a little bit higher than people had been anticipating, and that’s been dovetailing with what the expectations are around the BoJ,” said Mark McCormick, North American head of fx strategy at TD Securities in Toronto.

Japan’s Ministry of Finance also denied a report by the Wall Street Journal on Wednesday that it is considering issuing 50-year bonds for the first time to capitalize on ultra-low interest rates.

“We have had a lot of volatility driven by the different reports this morning,” Commerzbank currency strategist Thu Lan Nguyen said.

After falling more than 1 percent in Asian trading, the Ministry of Finance’s denial on the bond issue helped the yen recover. It was last down 0.92 percent at 105.64 per dollar.

The dollar pared gains against the yen and the euro after data showed that new orders for US manufactured capital goods rose modestly in June, but weak demand for machinery and a range of other goods suggested business spending will remain subdued for a while.

The dollar index, which tracks the currency against a basket of six major rivals, gained 0.11 percent to 97.259.—Reuters