* Bank of Japan reaffirms dovish policy stance
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, March 9 (Reuters) - The dollar rose half a percent against the yen on Friday, and is poised for its best weekly performance in five weeks as hopes of a breakthrough in the North Korean nuclear standoff bolstered risk sentiment.
Major global central banks ranging from the European Central Bank and the Bank of Japan also reaffirmed their commitment to stick to their ultra-easy policy stance this week and reassured currency markets that any withdrawal would be gentle, giving a reprieve to commodity-linked currencies such as the Aussie which have struggled in recent days.
At the outcome of a two-day monetary policy meeting on Friday, the Bank of Japan stuck to its dovish stance. While sounding optimistic on growth, Governor Haruhiko Kuroda reiterated there would be no plan to change monetary policy before the 2 percent inflation target is met.
"We are trying to find a bottom on dollar/yen and the other thing to watch for is when the typical year-end repatriation flows that are made by Japanese institutions for the fiscal year end abates, and that might push dollar/yen even higher," said Kenneth Broux, a currency strategist at Societe Generale.
Also fanning broad-based risk appetite was news that U.S. President Donald Trump was prepared to meet North Korea's Kim Jong Un in what would be the first face-to-face encounter between the two countries' leaders. That could potentially mark a major breakthrough in nuclear tensions with Pyongyang.
The news helped dollar/yen, which has fallen 7 percent since the start of the year on concerns that the outbreak of a trade war would derail a global growth recovery, to bounce sharply on Friday. The yen also fell 0.5 percent and 0.7 percent against the euro and sterling respectively.
For the week, dollar/yen is poised to rise 1 percent, its biggest weekly gain since the week ending Feb. 2.
But despite the dollar's bounce, strategists remain bearish about the outlook of the greenback in 2018 on a valuation basis and as the gap between the U.S. economy and other major economies, particularly in Europe, starts to narrow with the latter gaining momentum.
"The theme of dollar weakness is going to be a dominant one for the year with the US far advanced in its economic cycle while the other economies catch up," said Michael Sneyd, global head of FX strategy at BNP Paribas in London which expects euro-dollar to trade at $1.28 by the end of 2018.
On Friday, the euro was changing hands at 1.2296, about 0.1 percent weaker than the previous close. Against a basket of currencies, the dollar was broadly flat on the day at 90.23.
The euro remained on the back foot after falling on Thursday as ECB President Mario Draghi, while acknowledging faster growth in Europe, said regional inflation remained subdued and rising protectionism was a risk.
Draghi expressed his view on these issues at his news conference after a central bank policy meeting. It overshadowed the ECB's dropping of a long-standing pledge to increase its bond purchases if needed, a move that briefly spurred buying of the single currency.
Elswhere, the Norwegian krone was the outperformer against both the dollar and the euro rising 0.5 percent and 0.6 percent respectively as higher than expected inflation data raised expectations of a rate hike as early as the third quarter of 2018.
Norwegian consumer prices accelerated in February, reversing a January decline and triggering a stronger crown currency as the central bank prepares to raise rates later this year.
Reporting by Saikat Chatterjee; Editing by Toby Chopra