SYDNEY, Jan 23 (Reuters) - Japanese shares surged to fresh 34-year highs as the Bank of Japan stood pat on ultra-loose monetary policy, while Chinese stocks struggled as speculation of a huge rescue package from Beijing underwhelmed investors worried about the shaky economy.
European markets are likely to open mostly flat, with EUROSTOXX 50 futures up 0.1%. S&P 500 futures were flat although Nasdaq futures gained 0.1%.
The Nikkei's early gains were later erased by profit-taking but the index is still up 9% so far this year.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9%, boosted by a 2.9% surge in Hong Kong's Hang Seng index.
China's cabinet pledged late on Monday to take more forceful and effective measures to support market confidence. Further lifting sentiment was a Bloomberg News report that policymakers were seeking to mobilize about 2 trillion yuan ($278 billion) to stabilise the country's slumping stock markets.
The world's second-biggest economy faces numerous challenges including a deepening housing crisis and sluggish demand that is fuelling deflationary pressures -- factors that have weighed on the stock market in recent weeks.
Chinese blue-chips wavered between gains and losses, and were last up a modest 0.2%, not far off from five-year lows hit just on Monday.
"Reports of the rescue package has seen an evergreen question resurface: will it be enough to turn the ship around? And early market reactions suggest traders are underwhelmed," said Matt Simpson, senior market analyst at City Index.
"The National Team have likely been supporting the market already, and whilst that may have deterred bears it hasn't really enticed bulls from the sideline."
The Bank of Japan on Tuesday kept ultra-low interest rates intact in a widely expected move. It cut its near-term inflation outlook but revised up its forecast for fiscal 2025 to 1.8% from 1.7%.
Governor Kazuo Ueda will hold a press conference later in the day (0630 GMT). Traders are focusing on any clues on how soon the BOJ will pull short-term rates out of negative territory, which is seen as the next move Ueda will take in dismantling his predecessor's radical stimulus programme.
The yen found its footing and steadied at 148.01 per dollar, after dipping 0.3% in a knee jerk reaction to the BOJ statement.
Ray Attrill, head of FX research at National Australia Bank, said the revised inflation forecast for 2025 suggested the BOJ was moving closer to its target of achieving a 2% inflation rate.
"For our mind, April is the absolute earliest that they will contemplate a tightening... We actually think the risk is that they end up moving later rather than sooner than April."
Yields on Japanese government bonds eased 1 basis point to 0.64%, way down from a peak of 0.97% in November.
Most Asian share markets were up, tracking the overnight rally on Wall Street which sent the benchmark S&P 500 to another record high amid little market-moving data and events.
Investors are waiting for earnings from Netflix after the close and expectations are generally upbeat. Also due is GE, with JPMorgan looking for earnings to beat the Street's forecasts.
Traders have pared back their expectations for the timing of the first interest rate cut from the Federal Reserve, with the probability for March at just 40% now. However, they still see about five rate cuts this year.
The European Central Bank (ECB) meets on Thursday and is expected to hold monetary policy steady.
In the currency markets, the Australian dollar and the kiwi dollar - liquid proxies for China's yuan - each gained 0.5% thanks to the talk about stock market support measures from Beijing.
U.S. Treasury yields were steady after dipping overnight as investors took advantage of a decline in bond prices to enter the market. The 10-year were little changed at 4.0957%, while the two-year yield held at 4.3825%.
Oil prices were mostly steady on Tuesday after surging 2% overnight as a Ukrainian drone strike on Russia's Novatek fuel terminal caused supply disruptions.
U.S. crude futures were flat at $74.73 per barrel after climbing 2.4% overnight to a one-month top of $75.75 and Brent futures slipped 0.1% to $80.00.
Spot gold was 0.4% higher at $2,027.95 an ounce.
(Reporting by Stella Qiu and Ankur Banerjee; Editing by Stephen Coates and Kim Coghill)
