GLOBAL MARKETS-Asian stocks cheered by Fed reassurance, yen awaits BOJ
* Asian stocks open up, buoyed by record highs on Wall St
* Fed officials play down speculation of ending stimulus anytime soon
* BOJ policy decision closely watched, yen headed higher
By Ian Chua and Vidya Ranganathan
SYDNEY, May 22 (Reuters) - Asian stocks rose on Wednesday following a positive lead from Wall Street with Japan's Nikkei reaching a 5-1/2 year high, while the yen took a defensive stance ahead of the outcome of the Bank of Japan's (BOJ) policy meeting.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent, reversing some of Tuesday's 0.4 percent decline. The South Korean market climbed 0.4 percent.
Tokyo's Nikkei gained 1.1 percent, breaking above 15,500 for the first time in over five years.
"The buying just doesn't stop," said Kenichi Hirano, operating officer at Tachibana Securities.
"Today, if the Nikkei gets above 15,500, volatility could increase, trading could become choppy, but with foreigners still buying Japanese shares, the trend might still point upward for a while."
Investors took heart after two senior Federal Reserve officials dampened market speculation that the U.S. central bank might start tapering its stimulus programme this year.
That helped the Dow and the S&P 500 close at new all-time highs on Tuesday.
Markets will be looking for more clues on the Fed's next move when Chairman Ben Bernanke testifies before Congress later on Wednesday.
His remarks will be followed by the release of minutes of the last Fed meeting, which economists expect to give further details of how it will eventually manage the exit from ultra-easy policy.
Closer to home, the BOJ will take centre stage when it announces its policy decision at 0330-0500 GMT. This will be followed by a media briefing by Governor Haruhiko Kuroda.
The BOJ is expected to stand pat on monetary policy, but may front-load bond purchases or offer funds via market operations more frequently to help ease recent volatility in bond markets.
Caution ahead of the BOJ decision kept the yen pinned down. The dollar, which climbed 0.2 percent against the Japanese currency on Tuesday, held steady at 102.52.
Westpac currency strategist Sean Callow said he expected the dollar to drop towards 100 yen over the next few days or weeks.
"Bernanke should help it on its way but we may need soft payrolls data early June to confirm this," he said.
Callow said yen weakness was still driven heavily by speculative positioning, and Japanese demand for foreign bonds was still small. A stronger economy would encourage Japanese to keep money at home and possibly plough more into the domestic stocks, he said.
"Moreover, we view the relative success of Abenomics into 2014 as positive for yen, not negative," he said
Last month, the BOJ unleashed the world's most intense burst of stimulus, promising to inject $1.4 trillion into the economy in less than two years to meet its pledge of achieving 2 percent inflation in roughly two years.
Recent economic data has been encouraging, including better than expected export growth, and the Nikkei has soared in response to Prime Minister Shinzo Abe's aggressive growth strategy, termed "Abenomics". The yen has sunk 23 percent against the dollar since mid-November.
Against a broader basket of currencies, the dollar was down 0.1 percent at 83.79 on Wednesday, staying well off 3-year highs hit last week.
The euro rose 0.3 percent to 132.56, adding to Tuesday's 0.4 percent gain.
Commodity markets were subdued ahead of the key central bank events. Copper traded at $7,373.00 a tonne, while Brent crude was a touch softer at $103.54 a barrel.
Credit markets remained on a wait-and-watch mode ahead of Bernanke's testimony, with the Australian iTraxx index of credit default swaps quoted at 98 basis points and some way off last week's levels above 100.
"Market participants will be looking for any hints of potential changes in the Federal Reserve's asset purchase programme" Nomura analysts wrote in a note.
"With unemployment high and inflation below target, we do not think that the FOMC is ready to scale back its accommodation. Consequently, we do not expect the Chairman's testimony or the minutes to signal that a change in policy is imminent."
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