TOKYO (AP) _ The yen gained against the dollar Wednesday morning on growing expectations Japan will cut taxes to spur economic growth. Stock rise moderately.

The dollar bought 138.54 yen in late morning, down 1.29 yen from late Tuesday in Tokyo and below its late New York rate of 138.75 yen.

Prime Minister Ryutaro Hashimoto was expected to announce tax cuts later Wednesday, the Yomiuri newspaper reported.

Markets are hoping for tax cuts sizable enough to bolster consumer demand in Japan and rejuvenate the country's stagnant economy, which could also boost struggling Asian economies.

Pressure is growing for Japan to revive its economy. European Commission Vice President Sir Leon Brittan urged the country Tuesday to implement permanent tax cuts to help deal with bad debts held by its banks.

Brittan made his remarks in Washington after meeting with U.S. Treasury Secretary Robert Rubin and Rubin's deputy Lawrence Summers, who have both called on Japan to tackle its bad debt problems.

The Nikkei Stock Average rose 130.77 points, or 0.80 percent, to close morning trading at 16,547.05 points. On Tuesday, the Nikkei index closed up 65.83 points, or 0.40 percent.

The broader Tokyo Stock Price Index of all issues listed on the first section was up 5.46 points, or 0.43 percent, to 1,270.27. The TOPIX closed up 6.36 points, or 0.51 percent, the day before.

Meanwhile, the yield on the benchmark No. 182 10-year Japanese government bond rose to 1.355 percent from Tuesday's finish of 1.305 percent, driving its price down to 110.77 from 111.15.