(Corrects amount in last paragraph to 100 bln euros from 1 bln)
* Dollar slips after BOJ policy disappoints market
* Long-term yen weakness to resume
* Strategists say LTRO repayment could lift euro
LONDON, Jan 23 (Reuters) - The yen pushed higher against the dollar on Wednesday, extending gains from the previous day, when monetary easing from Bank of Japan fell short of some expectations for an immediate and more forceful action.
The euro rose against the dollar and cut losses versus the yen as sentiment towards euro zone assets continued to improve and investors positioned for euro-area banks to repay part of the loans taken from the European Central Bank last year.
That is likely to lead to some shrinking of the ECB's balance sheet at a time when the Federal Reserve and the BOJ are still expanding theirs. Balance sheet expansion usually hurts a currency, so a repayment to the ECB should help the euro especially against the dollar and the yen, traders said.
Strategists said while the yen would likely resume its overall trend and fall across the board, investors would refrain from betting against considerable yen weakness right away.
"We had a substantial move (in the yen) getting into the BOJ meeting. Subsequent questions are being raised whether the BOJ can achieve what it wants to and what are the implications of its policies," said Audrey Childe-Freeman, head of foreign exchange strategy at BMO Capital Markets.
"This is setting a much more cautious approach on the yen at the moment, I would definitely not go into fresh yen short positions just yet."
The dollar fell 0.2 percent to 88.52 yen, off a 2-1/2 year high of 90.25 yen on Monday. The U.S. currency is still up around 11 percent against the yen from mid-November.
After weeks of intense speculation that weighed on the yen, some market players were a bit disappointed by the BOJ's decision that its an open-ended commitment to buying assets would come into effect only next year.
While the move to end years of economic stagnation, which included a pledge to double its inflation target to 2 percent, was the bank's boldest action yet, it had already been priced in by markets and fell short of lofty expectations for a faster, substantial stimulus boost.
"Our view is that we will get stuck below 90 yen but probably go no lower than 87 until we get more news, which will not come out until we find out who the new (BOJ) governor is," said Geoff Kendrick, currency strategist at Nomura.
A change in BOJ leadership in April is expected to weigh on the yen, given prospects for Prime Minister Shinzo Abe to appoint a governor favouring more aggressive monetary easing.
Analysts saw the yen weakening over the medium term, based on expectations the BOJ will remain under pressure to inject more stimulus into the economy, possibly pushing the dollar to 100 yen, a level last seen in April 2009.
The yen was steady against the euro. The single currency was at 118.25 yen, showing some signs of stability after three straight day of losses.
The euro rose 0.2 percent against the dollar to $1.3342, holding within sight of last week's 11-month high of $1.3404. Market players reported bids at $1.3275-85.
The euro has been buoyed by receding fears around the debt crisis, highlighted by European Central Bank president Mario Draghi comments on Tuesday that the euro zone could begin 2013 with more confidence.
While strong German economic data on Tuesday lent some support to the euro, strategists said that if the euro zone's flash Purchasing Managers' Index figures due Thursday beats forecasts, the euro could break above the $1.34 level.
Some analysts said the euro could rise before an announcement on Friday on the size of next week's first repayments of three-year loans taken by banks from the ECB a year ago.
"If (the repayment) is of a substantial size it would confirm the systemic risks in euro zone are fading further...that could be positive for the euro," BMO's Childe-Freeman said.
Banks took more than one trillion euros in ultra-cheap LTRO (loan-term refinancing operation) loans from the ECB. A Reuters poll showed traders expected around 100 billion euros to be paid back next week. (Additional reporting by Nia Williams; editing by Ron Askew)