Foreign investors' stepped-up purchases of Japanese equities -- the main catalyst for the yen's rise last year -- are no longer playing a major role in daily market activity.

Behind the yen's weakness in recent weeks are moves by foreign investors to sell yen to hedge against losses on their Japanese portfolios.

Japanese institutional investors, on the other hand, are selling yen for dollars to unwind their hedge against losses on their foreign portfolios.

The yen's weak showing since the beginning of the year has also prompted Japanese exporters to unload their dollar holdings.

They have apparently covered their export claims for the last quarter of the business year to March.

A bout of speculative buying is adding to the upward pressure on the dollar.

The yen's weakness may not last long, however.

Its fall in value thus far this year cannot be taken to demonstrate a turnaround in the long-range direction in its value.

The shift in capital flow away from the yen and into the dollar could prove a one-time event.

As a result of the dollar hitting the 110 yen level Thursday, the upward momentum in its value may soon run out.

Given further U.S. interest rate hikes widely expected to be on the way, investors remain guarded against falls in prices of potentially risky foreign investment vehicles in general and U.S. equities in particular.

Still, foreign investors appear likely to remain cautious about building their Japanese portfolios until after the current fiscal year.

Investor confidence in U.S. economic prospects remains strong as the U.S. Federal Reserve aims to engineer a soft landing in which growth slows enough to keep inflation from getting out of hand.

While Japan's economic recovery has largely been factored into yen-based assets, the U.S. budget surplus is helping bolster investor confidence in the U.S. economy and financial markets.

In direct contrast, the Japanese budget deficit is refusing to come down, fueling a shift in investor preference away from Japanese securities and into U.S. Treasuries.

In short, the yen appears likely to remain weak against the dollar at least until the end of the current fiscal year.