The dollar weakened against the yen in Asian trade Wednesday, with stronger risk aversion prompting safe haven buying of the Japanese currency following a lackluster reading from the Bank of Japan’s corporate sentiment survey.

The U.S. currency USDJPY, -0.18%  slid to as low as ¥119.42 before bouncing back to ¥119.92, compared with ¥120.14 late Tuesday in New York.

The greenback had been moving in a tight range either side of the ¥120 mark earlier in the session, with investors largely on cruise control ahead of closely watched U.S. labor data out Friday, but it fell alongside the Nikkei Stock Average NIK, -0.48%  following the release of the BOJ’s quarterly tankan survey. The Nikkei briefly fell 1.5% to 18927.95, its lowest since March 12. The benchmark index later trimmed its earlier losses, and was down 0.9% midday.

Despite expectations that the weak yen would improve their mood, the BOJ tankan showed the main index measuring sentiment among big manufacturers was unchanged at plus 12 from the December poll. Economists surveyed by The Wall Street Journal and the Nikkei had expected a reading of plus 14.

The BOJ tankan “was not good overall,” indicating that the economy is stalling rather than recovering, said Mizuho Securities chief FX strategist Kengo Suzuki.

Suzuki said stop-loss selling orders gave the dollar an extra slide against the yen before dip buying kicked in.

Still, the dollar’s strength against a basket of major currencies including the euro in recent sessions, suggests “hopes for the U.S. rate increase in June still remain pervasive,” said IG Securities market analyst Junichi Ishikawa, after comments by a Federal Reserve official overnight. “It seems investors are continuing to build up dollar-long positions,” he said.

The WSJ Dollar Index BUXX, -0.26% a measure of the dollar against a basket of major currencies, was down 0.3% at 87.71 after four consecutive session of gains.

Attention to the yen’s strength against other currencies is also needed, he added. If the stronger dollar bites into the bottom line of U.S. corporate earnings, hurting stocks later this month, the yen may remain firm or gain against the dollar despite its overall strength against other currencies, he said.

The euro EURUSD, +0.38%  was higher at $ 1.0784 from $ 1.0732, with short-covering kicking in. The common currency was down at ¥129.32 from ¥128.92.

Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond and a voting member of the Federal Open Market Committee, suggested Tuesday that a June rate increase was still in the cards.

“I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting,” he said.