* MSCI Asia ex-Japan inches higher
* BOJ eases further, takes open-ended commitment to buy assets
* Nikkei surges but quickly erases gains
* Yen initially weakens vs dollar and euro after BOJ
The yen and Japanese equities were volatile on Tuesday after the Bank of Japan took bold easing measures, while other Asian stock markets posted modest gains.
The BOJ on Tuesday doubled its inflation target to 2 percent and adopted an open-ended commitment to buy assets, surprising markets that had expected another incremental increase in its 101 trillion yen asset-buying and lending programme.
"It was more or less within market expectations and was not disappointing. But it also didn't top expectations because there was speculation that the BOJ would do all it can, including removing the 0.1 percent floor on short term interest rates," said Hiroshi Maeba, head of FX trading Japan at UBS in Tokyo.
"Initial market reaction shows there are still players who want to short the yen, and the BOJ's decision today clears the way for further dollar/yen buying. I think the dollar may hit 95 yen by March," he said, adding that for now, the dollar/yen was likely to trade in ranges.
Japan's benchmark Nikkei average surged as much as 0.8 percent before trimming all gains to fall 0.6 percent. Tokyo shares have been rising in tandem with the yen's slide against major currencies on expectations for bolder BOJ steps. The Nikkei tumbled 1.5 percent on Monday after investors booked profits from the index's 2.9 percent rally on Friday.
The dollar rose as high as 90.18 yen, but was last trading down 0.5 percent at 89.18 yen. It touched a fresh 2-1/2-year high of 90.25 on Monday. The euro rose to 120.18, but recently down 0.5 percent at 118.94 yen. The euro hit its peak since May 2011 of 120.73 on Friday.
There has been a perception in markets that even if investors rooting for much bolder BOJ steps cut their yen short positions in disappointment over the ultimate outcome, the yen's rebound was likely to be limited relative to its 13 percent decline against the dollar and a 20 percent drop versus the euro over the past two months. Such views were fed by expectations the BOJ will continue to aggressively ease monetary policy to drive Japan out of years of deflation and support the economy.
The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent. The index was pulled down on Monday after briefly touching 17-1/2-month highs as Malaysian stocks suffered their biggest drop in 16 months on election risks.
POSITIVE FACTORS EMERGE
Overall market sentiment was likely to remain supported by signs of a compromise to avert a U.S. fiscal crisis and hopes for a recovery in global growth following last week's positive data from the world's top two economies, the United States and China.
European shares rose on Monday near two-year highs, with investors betting on an improving economy in Europe. Wall Street was closed for Martin Luther King Jr. Day.
Republican leaders in the U.S. House of Representatives have scheduled a vote on Wednesday on a nearly four-month extension of U.S. borrowing capacity, aimed at avoiding a fight over the looming federal debt ceiling and shifting their negotiating leverage for spending cuts to other fiscal deadlines.
London copper climbed 0.7 percent to $8,115 a tonne on growing confidence in the strength of China's economic recovery ahead of an early gauge of manufacturing activity this week, while BOJ easing has also stoked investor appetite for risk.
U.S. crude futures steadied around $95.59 a barrel while Brent futures edged up 0.3 percent to $112.
Gold was up 0.2 percent to $1,692.60 an ounce on a fresh round of easing from the BOJ.