By Hideyuki Sano
TOKYO (Reuters) - Japanese shares surged and the yen sagged on Tuesday after the Bank of Japan doubled loan programs aimed at stimulating bank lending and economic growth, while most other Asian shares were softer after solid gains in recent sessions.
European shares were expected to be mixed after hitting a three-week high the previous day, with Germany's DAX seen rising 0.1 percent and Britain's FTSE falling 0.1 percent.
S&P stock futures pointed to a slightly firmer tone on Wall Street as U.S. markets were set to reopen after a three-day weekend.
Japan's Nikkei average rose as much as 3.5 percent after the BOJ extended and expanded special loan facilities aimed at driving more funds through the banking sector to borrowers.
The extension had been expected as the schemes were set to expire in March.
"Speculators jumped on the news but if you think carefully, it's questionable if this will justify a big rally in the Nikkei," said Norihiro Fujito, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.
The BOJ also kept its main asset purchase policy target unchanged as expected.
The dollar jumped 0.7 percent on the yen to hit a two-week high of 102.745 yen in sympathy with the gains in Japanese shares.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent as Chinese shares slid from two-month highs after the Chinese central bank drained funds from money markets.
Still, the index has gained nearly 6 percent since hitting five-month lows earlier this month as waning concerns over emerging market economies have underpinned riskier assets in the past week.
But some analysts cautioned that share markets may be getting ahead of themselves in assessing the economic outlook.
"There is a bit of a fault line between the currency market and the stock market at the moment. U.S. shares are riding on optimistic views on the U.S. economy but the currency market is viewing the U.S. economic fundamentals less favourably," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
A run of weak U.S. data, including an unexpected fall in January manufacturing output on Friday and an underwhelming report on payrolls in the last two months, has put the dollar under pressure.
But Wall Street shares have rallied in recent sessions, with the S&P 500 index edging near an all-time high hit last month, in part on the view that weak figures were an aberration stemming from bad weather.
While some investors could be speculating that the Fed may slow its policy tightening, most expect it is likely to stick to the current pace of reducing its bond-buying by $10 billion at each of its policy meetings.
The market may get more clarity on Wednesday when the Fed publishes the minutes of its last policy meeting on January 28-29.
The dollar had a bleaker reaction to the soft U.S. data, with the dollar index standing at 80.114 near its lowest level so far this year.
As the dollar lost altitude, the euro held firm at $1.3702, having hit a three-week high of $1.37245 on Monday.
The single currency was also helped by an improving mood after Italian centre-left leader Matteo Renzi, who has pledged to deliver more ambitious reforms, received a mandate to form a new government.
That helped to push Italian debt yields to eight-year lows.
The Australian dollar hit a five-week high of $0.9078, testing stiff chart resistance around $0.9080.
Gold and silver held near their 3-1/2-month peaks hit on Monday, with gold trading at $1,328.30 per once and silver at $21.64.
Elsewhere, the Thai baht extended early losses to as much as 0.5 percent after police officers were injured in clashes with anti-government protesters in central Bangkok. It has been largely resilient in the face of prolonged political tensions, however, rising around 1.3 percent so far this year.
(Additional reporting by Takeshi Umekawa in Tokyo and Clement Tan in Hong Kong; Editing by Jacqueline Wong & Kim Coghill)