* BOJ's policy decision on Tuesday leaves some wanting more
* Yen's recent downtrend still seen intact
* Aussie falters as tame inflation offers room for rate cut
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, Jan 23 (Reuters) - The yen held firm on Wednesday, after surging the previous day as investors cut bearish bets on the currency as the monetary easing announced a day earlier by the Bank of Japan's fell short of some expectations.
The BOJ, under intense political pressure to lift Japan out of recession, said it would double its inflation target and switch to an open-ended commitment to buying assets next year.
While the move to end years of economic stagnation was the bank's boldest action yet, it had been widely leaked to the media and fell short of lofty market expectations for an immediate substantial stimulus boost.
"Raising the inflation target was significant but the increase in easing doesn't match the enormity of the challenge," said Gareth Berry, G10 FX strategist for UBS in Singapore.
Under the BOJ's new open-ended pledge, the size of its asset buying scheme is set to increase in 2014 at a pace that will be about three times slower than the increase planned in 2013 under its existing asset buying programme, Berry said.
The dollar dipped 0.1 percent to 88.65 yen. The greenback struggled to regain ground after sliding 1.1 percent on Tuesday, its biggest one-day fall versus the yen since May.
The greenback, which hit a 2-1/2 year high of 90.25 yen on Monday, is still up about 12 percent compared to a trough hit in mid-November.
"Short-term we will probably hang around these levels for a while given the absence of upside triggers for dollar/yen," said Berry at UBS, adding that it might be a week at the earliest before the dollar manages to rise back to 90 yen.
The euro slipped 0.2 percent to 118.01 yen, down from a 20-month peak of 120.73 yen reached on Friday.
Traders said the rebound in the yen could offer better levels to re-establish short positions in the currency, based on expectations that the BOJ will remain under pressure to inject more stimulus into the economy, particularly if, as expected, a more dovish governor takes over the helm in April.
"The initial flurry of disappointment reflects the fact that so much anticipation surrounded the announcement, and the fact that in the very short term, this policy move changes little," said Kit Juckes, strategist at Societe Generale.
"Japan, like Oliver Twist, has been fed on a diet of thin gruel for a long time. However, I continue to believe that this move is consistent with the shift in attitude and in the direction of policy, which will deliver a higher USD/JPY level over the coming year, and an overshoot above 100 in due course."
The Australian dollar fell 0.3 percent to $1.0536 after a surprisingly benign inflation reading was seen as adding modestly to the chance of an interest rate cut by Australia's central bank next month.
The euro slipped 0.1 percent to $1.3315.