The yen dropped against major currencies on Wednesday after the Bank of Japan maintained ultra-low interest rates, although it recovered some ground on expectations for tighter policy in the coming months.

The central bank stunned the market in December by raising its cap on the 10-year yield to 0.5% from 0.25%, doubling the band it would permit above or below its target of zero. Since then, speculation has swirled that the BOJ could tweak its yield curve control (YCC) policy further or even scrap it.

At a two-day policy meeting, the BOJ kept intact its YCC targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. It also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target.

The yen was broadly weaker, although analysts said the BOJ was likely to tighten policy soon and the currency walked back some of its losses.

The dollar rose as much as 2.7% to 131.58 yen before gains were pared. It was last up 0.5% at 128.78 yen.