The Japanese yen dropped against its key counterparts in the Asian session on Wednesday, extending a decline seen yesterday, amid a widening interest rate differential between Japan and other countries.

While the U.S. Federal Reserve is expected to continue its aggressive policy tightening to tame inflation, the Bank of Japan is sticking to ultra easy monetary policy to support the economy.

BOJ Governor Haruhiko Kuroda rejected the possibility of a monetary tightening earlier this week and promised to continue its current policy stance to boost recovery from the pandemic.

In contrast, the Fed is expected to raise interest rate by half-point at its meetings due next week and in July.

Investors await interest rate decision from the European Central Bank and the release of U.S. inflation data for more clues about monetary policy outlook.

Data from the Cabinet Office showed that Japan's gross domestic product contracted an annualized 0.5 percent on year in the first quarter of 2022 - beating forecasts for a decline of 1.0 percent following the 3.8 percent increase in the previous three months.

On a seasonally adjusted quarterly basis, GDP slipped 0.1 percent - again topping expectations for a decline of 0.3 percent following the 0.9 percent gain in the three months prior.

The yen declined to more than a 20-year low of 133.30 against the greenback and a 1-1/2-month low of 167.46 against the pound, from its early highs of 132.54 and 166.83, respectively. The yen may challenge support around 135.00 against the greenback and 170.00 against the pound.

The yen reversed from its early highs of 141.83 against the euro and 95.74 against the aussie and touched a 7-1/2-year low of 142.40 and a 7-year low of 96.20, respectively. The yen is likely to face support around 144.00 against the euro and 98.00 against the aussie.

The yen depreciated to a 1-1/2-month low of 86.24 against the kiwi and an 8-1/2-year low of 106.23 against the loonie, off its prior highs of 85.88 and 105.76, respectively. The next likely support for the yen is seen around 88.00 against the kiwi and 108.00 against the loonie.

The yen edged down to 136.71 against the franc, after rising to 136.16 earlier in the session. The yen is seen finding support around the 138.00 mark.

Looking ahead, U.K. construction PMI for May and Eurozone GDP and employment reports for the first quarter are due out in the European session.

U.S. wholesale inventories for April will be published in the New York session.

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