Asia, Japan shares fall, yen rises as BOJ stimulus disappoints

By Nichola Saminather and Hideyuki Sano

SINGAPORE/TOKYO (Reuters) - Asian shares slipped after touching a near one-year peak on Friday, while Japanese stocks tumbled and the yen strengthened as the Bank of Japan's fresh stimulus measures disappointed markets.

The BOJ modestly increased purchases of exchange-traded funds, but maintained its base money target at 80 trillion yen ($775 billion) and the pace of purchases of other assets, including Japanese government bonds.

The central bank also held at 0.1 percent the interest it charges to a portion of excess reserves financial institutions leave with the central bank.

Japan's Nikkei, which swung between gains and losses right after the announcement, was last trading down 1.5 percent. The index, which touched a seven-week high last week, was on track for a 2.4 percent weekly drop, shrinking gains for July to 4.2 percent.

The dollar weakened 1.9 percent to 103.27 yen, its biggest one-day decline since June 24, after the UK's decision to leave the European Union.

Before the BOJ's decision, many investors warned of a big chance of disappointment because markets have long expected more stimulus, making it difficult for BOJ Governor Haruhiko Kuroda to spring a surprise.

"The BOJ did not live up to expectations," said Norio Miyagawa, senior economist at Mizuho Securities in Tokyo. "Increasing ETF purchases makes no contribution to achieving 2 percent inflation. The BOJ won't admit it, but it has reached the limits of quantitative easing and negative rates."

MSCI's broadest index of Asia-Pacific shares outside Japan pulled back 0.3 percent after hitting the highest level since Aug. 11, leaving it on track for gains of 1 percent for the week, and 5.5 percent for the month.

Wall Street shares remained near all-time highs, with tech heavyweights Alphabet and Amazon rising after the bell as their earnings beat expectations.

The stronger yen also weighted on the dollar index, which slipped 0.4 percent to 96.364, putting it on track for a slide of 0.6 percent for the week, but a gain of 0.2 percent for the month.

European shares fell on Thursday, as markets awaited the release of the stress test results on European banks on Friday night.

The euro stood little changed at $1.1084 . It is up almost 1 percent this week, but poised for a 0.2 percent loss in July.

Elsewhere in markets, oil prices fell to three-month lows, with U.S. benchmark now down more than 20 percent from this year's peak on growing worries that the world might be pumping more crude than needed.

U.S. crude futures fell to as low as $40.95 per barrel and were last down 0.2 percent at $41.08. It's set for a drop of 7 percent for the week and 14.9 percent in July.

International benchmark Brent crude futures dropped 0.1 percent to $42.65. It is down 6.7 percent this week and 14 percent this month.

(Additional reporting by Leika Kihara; Editing by Kim Coghill and Richard Borsuk)