* Yen extends losses following previous day's tumble
* Yen on defensive as safe haven status continues to fade
* Japan exports plunge a record 45.7 pct in January
By Shinichi Saoshiro
TOKYO, Feb 25 (Reuters) - The yen edged down against the dollar and euro on Wednesday, losing further ground as its perceived safe-haven status crumbles on a rapidly weakening Japanese economy and domestic political woes.
The yen fell to a three-month low versus the dollar and plunged more than three percent against the euro on Tuesday.
Along with the dollar, the yen had served as a safe haven unit this year as stock markets worldwide slide, but it began losing its appeal when data last week showed Japan's economy had shrunk the most in 35 years during the October-December quarter.
It took a further blow when Japan's finance minister suddenly resigned last week, fanning fears of political instability.
"This is about the yen weakening against other currencies. We are witnessing the yen depreciate as prospects for the Japanese economy deteriorate further," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.
Data released on Wednesday showed that Japan's exports plunged a record 45.7 percent in January from a year earlier as the global economic downturn sapped demand for Japanese goods.
"Unstable political conditions in Japan have been exposed and the market is beginning to wonder if the country can cope with potential financial sector instability," Inoue said.
The dollar inched up 0.1 percent to 96.76 yen. It touched a three-month high of 96.94 yen on trading platform EBS the previous day.
The greenback's safe haven status has held intact, drawing demand on Tuesday from risk averse investors after a report showing U.S. consumer confidence plunged to another record low in February.
The euro gained 0.3 percent to 124.48 yen after hitting a seven-week high of 124.75 yen on EBS the previous day.
The euro rose 0.2 percent to $1.2864, with the European currency's strength against the yen also lifting it against the dollar. (Editing by Edwina Gibbs)