By Richard Hubbard
LONDON (Reuters) - The dollar rose more than 2 percent against the yen after the Bank of Japan took surprisingly strong easing steps on Thursday, while Europe's share markets softened before a European Central Bank meeting later in the day.
The BoJ announced a radical overhaul of its policy framework, shifting to a new target for setting monetary policy, and pledging to double its government bond holdings in two years as it seeks to end nearly two decades of deflation.
The dollar jumped 2.4 percent to above 95 yen on the announcement and the euro gained 2.45 percent to around 122 yen, while the dollar gained 0.5 percent against a basket of major currencies (.DXY).
"The measures announced overall were bold, and more than what had been expected," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
Japan's Nikkei stock average (.N225) rose 2.2 percent while the 10-year Japanese government bond yield dropped to 0.425 percent, breaking its previous record low of 0.43 percent hit in June 2003.
European markets faced a busy day of central bank meetings, sovereign bond auctions and economic data likely to remind investors of ongoing problems in the recession-hit region.
The FTSE Eurofirst 300 index (.FTEU3) of top European shares dropped 0.3 percent while London's FTSE 100 (.FTSE), Paris's CAC-40 (.FCHI) and Frankfurt's DAX (.GDAXI) were between 0.1 percent up and 0.3 percent down in early trading. (.L)(.EU)
Markets are awaiting the outcome of the ECB policy meeting at which the bank is expected to hold interest rates steady but could give a sign it is preparing for a future cut. The Bank of England, which also holds its policy meeting later, is likely to keep its rates on hold as well.
Before the central bank meetings, Spain and France auction new debt in a big test of investor sentiment following the chaotic Cyprus bailout, while data on the euro zone service sector performance in March will likely confirm a weak first quarter of the year.
The busy schedule left Germany's key bond market little changed with Bund futures 5 ticks higher at 145.57, and 10-year German bond yields 0.4 basis points lower at 1.278 percent.
Meanwhile oil was steadily recovering after its biggest fall in five months on Wednesday when weak private sector jobs data and swelling inventories in the United States muddied the demand outlook.
Brent crude added 0.2 percent to $107.37 and U.S. crude was holding around $94.50 a barrel.
(Additional reporting by Chikako Mogi in Tokyo; editing by Philippa Fletcher)