The yen soared to a four-month high against the US dollar on Tuesday after a surprise tweak to monetary policy by the Bank of Japan, which has decided against hiking interest rates to tame decades-high inflation.

Rallying also against the euro, the yen's jump weighed heavily on share prices of Japanese exporters.

"The shift in (Bank of Japan) policy was slight," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy."

The Bank of Japan (BoJ) adjusted its parameters for controlling bond yields, in a shift away from its long-running dovish stance of keeping rates ultra-low to boost the struggling economy.

Inflation in Japan has risen sharply this year, with the consumer price index in October coming in at 3.6 percent, the highest in four decades, although bank boss Haruhiko Kuroda and other officials have said that would be temporary, citing a lack of strong demand and wage rises.

The BoJ move sent the yen to 132.30 per dollar, its strongest level since August.

Japan's currency has been hobbled this year by the central bank's determination to stick to its loose monetary policy even as the Fed ramped up borrowing costs. The yen hit a 32-year low of around 150 to the US dollar in October.

Tuesday's policy move "was bound to happen with inflation rising in Japan, it's just happened sooner than many thought", said Amir Anvarzadeh of Asymmetric Advisors.

"It could spark money flowing back into Japan." (AFP)