* Dollar heads higher for second day after Trump tax comments
* Eyes on meeting with Japanese PM in Washington
* Chinese trade data supports better global mood
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, Feb 10 (Reuters) - The dollar hit its highest level in 10 days against the yen and a basket of currencies ahead of a meeting of the U.S. and Japanese leaders on Friday, putting it on course for its best week since mid-December.
U.S. President Donald Trump's promise to announce within weeks a major tax reform plan cooled some of the market nerves that have dominated currency markets for weeks, reinvigorating dollar bulls.
While Trump may discuss his concerns over a strong dollar with his Japanese counterpart, it is expected that whatever is said publicly after the meeting will focus on trade and investment deals.
"Currency policy may not be a dominant topic at the summit, and that would be positive for the dollar," Shusuke Yamada, chief Japan FX strategist at Bank of America-Merrill Lynch, said.
The dollar has fallen steadily against the euro and yen since mid-December as Trump focused on protectionist trade policies, ran into trouble with some of his executive orders, and appeared to step away from the United States' long-held strong dollar policy.
But Trump spoke out on stimulus measures on Thursday, promising a "phenomenal" tax plan in a White House meeting with airline executives, although he did not offer specifics other than citing the need for a lower tax burden on businesses.
The dollar index against a basket of major currencies was up another 0.2 percent in early trade in Europe on Friday, trading at 100.86 - its highest since Jan 30.
Against the yen, the chief gainer from a wobble in global risk appetite earlier this week, it was up almost half a percent at 113.75 yen. The euro was little changed at $1.0666 after losing 0.4 percent the previous day.
"The dollar is supported by the Trump announcement on taxation," said Thu Lan Nguyen, a currency strategist with Commerzbank in Frankfurt. "But maybe investors will remain cautious for the time being. Since we saw what happened with the (blocked) travel ban ... uncertainty is still quite high about what Trump will do and what he can get through."
The euro is on track to shed more than 1 percent in a week dogged by a perceived rise in the political risks facing the euro zone. Nguyen said she expected more hedging of currency exposure to April's French elections in the weeks ahead.
Three-month implied volatility - an options contract which allows investors to insure themselves against swings in the currency over that period - has jumped to the highest in a month as a result.
Dealers also said that Trump's backing down on surprise early criticisms of China's "One China" policy had helped risk appetite globally.
Trade numbers out of the world's second largest economy were also strong, helping the Australian dollar gain up to 0.4 percent.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in TOKYO Editing by Jeremy Gaunt)