TOKYO (Kyodo) -- The yen strengthened to around a two-month high against the U.S. dollar in the 149 zone in Tokyo on Thursday, amid rising speculation that the Bank of Japan could raise its benchmark interest rate at its next policy meeting.

Investors snapped up the yen, pushing it to 149.95, as stronger-than-expected gross domestic product data earlier this week fueled speculation of further BOJ tightening, lifting Japan's benchmark 10-year government bond yield to a fresh 15-year high.

Yen buying accelerated after BOJ Governor Kazuo Ueda said the recent trend of higher interest rates was not discussed in his meeting Thursday with Prime Minister Shigeru Ishiba, dealers said.

"The market has interpreted this as the government tacitly accepting the rise in domestic interest rates, fueling speculation the BOJ might raise rates sooner than expected," said Yuzo Sakai, chief manager of business planning at Ueda Totan Forex Ltd.

At 5 p.m., the dollar fetched 150.16-18 yen compared with 151.43-53 yen in New York and 151.65-67 yen in Tokyo at 5 p.m. Wednesday.

The euro was quoted at $1.0431-0432 and 156.64-68 yen against $1.0418-0428 and 157.90-158.00 yen in New York, and $1.0451-0453 and 158.50-54 yen in Tokyo late Wednesday afternoon.

The yield on the benchmark 10-year Japanese government bond rose 0.010 percentage point from Wednesday's close to 1.440 percent, its highest level since November 2009.

On the stock market, Tokyo shares dropped as the yen's appreciation led to sell-offs of exporter issues, and caution persisted over proposed U.S. tariff policies.

The 225-issue Nikkei Stock Average ended down 486.57 points, or 1.24 percent, from Wednesday at 38,678.04. The broader Topix index finished 32.65 points, or 1.18 percent, lower at 2,734.60.

On the top-tier Prime Market, the main decliners were construction, nonferrous metal and service shares.

The Nikkei stock index briefly dropped nearly 700 points, as the yen's appreciation dragged on exporters and sentiment continued to deteriorate over U.S. President Donald Trump's threat of 25 percent tariffs on automobiles, semiconductors and pharmaceuticals.

Falls in heavyweight semiconductor shares contributed to the index's sharp decline, with the sector unable to regain its upward momentum since the market crash last summer when the BOJ raised rates and concerns about the U.S. economy emerged, said Koichi Fujishiro, senior economist at the Dai-ichi Life Research Institute.

"Sentiment has deteriorated rapidly recently amid concerns about the impact of U.S. tariffs, giving the impression that Japanese stocks can no longer keep up with the U.S. market," said Fujishiro.

With Japan's benchmark 10-year government bond yield rising to around a 15-year high on speculation that the BOJ could hike rates more aggressively, a cautious mood also prevailed before the release of consumer price data Friday, brokers said.