The currency sank as low as 78.28 yen against the dollar in the hours after Japan reported a 2.493 trillion yen ($32 billion) trade deficit for 2011, its first in 31 years.
Economists tied the deficit to slowing global growth and rising energy imports as well as the strong yen, which raises the cost of manufacturing in Japan.
The Japanese currency has traded at historically strong levels for months, and was one of the best performers last year. Investors have piled into the yen as a shelter from the euro-zone crisis, which has whipsawed the euro and many emerging-market currencies.
A prolonged trade deficit could weaken the yen by reducing the inflow of the currency. However, Japan should return to posting monthly surpluses by the second half of 2012, Goldman Sachs analysts said in a note.
The yen's losses were quickly reversed after the Federal Reserve said it expects to hold interest rates near zero through late 2014, sending the dollar tumbling against most currencies.
The dollar traded at 77.69 yen late Wednesday in New York, from 77.66 yen on Tuesday.
The Fed surprised the market by extending the period it expects to keep its key interest rate near zero by a year beyond an earlier pledge not to raise rates into 2013.
The outlook came in a statement put out at the conclusion of the central bank's policy meeting.
"The Fed was crystal clear" in its intentions to keep rates low until at least 2014, said Krishna Memani, portfolio manager and director of fixed income at Oppenheimer.
Low interest rates make the dollar relatively cheap to use to fund trades in other currencies in countries where interest rates are higher, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.
The prospect of another two years of ultralow rates will benefit higher-yielding currencies like the Australian, New Zealand and Canadian dollars, Mr. Esiner said.
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