* Dollar/yen up more than 2.5 pct, could target 100 yen
* BOJ says to double monetary base in two years
* Euro falls on weak euro zone data, vulnerable before ECB
* BoE decision also due, dollar index hits 8-month high
By Jessica Mortimer
LONDON, April 4 (Reuters)- - The yen tumbled on Thursday after the Bank of Japan announced aggressive measures to ease monetary policy, including a plan to double its holdings of bonds and stocks in two years.
Analysts and traders expected further losses, that would take the yen towards lows reached in mid-March, with the potential for the dollar to rise towards 100 yen.
The market's focus was firmly on the yen but the euro was seen as vulnerable after weak euro zone business activity data highlighted a fragile economy and before a European Central Bank policy meeting later in the day.
The dollar rose more than 2.5 percent to 95.69 yen, climbing closer to a 3-1/2 year peak of 96.71 set on March 12.
Traders said the yen's falls were all the greater because before the announcement the market had geared itself for the risk that the BOJ would deliver less than the market expected, as it has done in the past.
"The BOJ has set in play a very aggressive expansion of monetary policy and it's very likely dollar/yen will continue to rise," said Lee Hardman, currency economist at BTMU, adding the dollar was poised to hit 100 yen in the next three to six months.
The BOJ shocked markets in what was seen as a radical overhaul of policymaking, shifting the policy target to the monetary base from the overnight call rate and ditching its previous stance of shunning long-term bonds.
The yen extended fails as BOJ governor Haruhiko Kuroda said he would not hesitate to adjust policy further.
"Foreign investors are likely to be convinced by the BOJ's actions and this will lead to continued yen selling," said BTMU's Hardman.
He said Japanese institutional investors were also likely to increase overseas investments, which could trigger "the next leg" in yen weakness.
The BOJ's new plan means it will buy about 7 trillion yen ($73 billion) of bonds per month, equivalent to about 1.4 percent of GDP. By comparison, the U.S. Federal Reserve buys $85 billion of bonds - about 0.6 percent the size of the economy.
Gains against the yen and the euro pushed the dollar to an eight-month high against a basket of currencies, with its index rising to 83.390.
But some analysts were more cautious on the scope for yen falls.
"While I do agree that the yen will decline in the long run, I still think the yen could gain this quarter on adjustment after a sharp fall. For the dollar to rise further, we need (a) strong U.S. economy but U.S. data is showing otherwise," said Koji Fukaya, CEO of FPG Securities in Tokyo.
Weak U.S. private sector jobs data on Wednesday dampened expectations for Friday's key payrolls data.
The euro rose around 2.5 percent to 122.705 yen, before paring gains to last trade up 2.15 percent at 122.09 yen.
The single currency fell 0.5 percent to $1.2790 and could be vulnerable to more losses towards the four-month trough of $1.2750 plumbed on March 27, analysts said.
The ECB was expected to keep its key interest rate at a record low 0.75 percent. ECB President Mario Draghi is likely to highlight a bleak economic outlook in a post-meeting news conference while seeking to calm investors' fears about the repercussions of the Cyprus bailout terms.
The Bank of England policy decision is widely expected to keep both interest rates and its quantitative easing target unchanged.
Sterling fell 0.6 percent to a two-week low of $1.5034 on concerns about a weak UK economy and the risks of more QE in the months to come.