dollar down vs euro

Yen down sharply as Japan fiscal year comes to an end

* Euro gains vs dollar; European stocks rise 2 pct

* Focus on G20, ECB meeting; euro gains seen limited (Recasts, updates prices, adds quotes, data; changes byline, dateline, previous London)

By Steven C. Johnson

NEW YORK, March 31 (Reuters) - The yen fell on Tuesday as the end of Japan's fiscal year and more poor economic data spurred investors to deploy funds abroad while stocks rose, helping the euro gain on the dollar ahead of a G20 meeting.

The yen, which rose a day earlier as risk aversion and year-end pressure prompted Japanese investors to bring money home, reversed course on Tuesday as traders closed the books on the fiscal year. A spike in Japanese unemployment also put pressure on the currency.

The dollar was last trading up 1.2 percent at 98.41 yen and was on track for an 8.7 percent gain in the first three months of the year, the yen's worst quarter since 2001.

The world financial crisis has devastated Japanese exports and led to a sharp contraction in the fourth quarter, leaving Prime Minister Taro Aso's government vulnerable to collapse.

"Fiscal year-end had been holding people back from selling yen. But the fundamentals are absolutely horrendous, there's policy gridlock, and this lets Japanese investors continue to invest money abroad in droves," said Samarjit Shankar, global FX strategy director at The Bank of New York-Mellon in Boston.