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* Yen rebounds as BOJ decision disappoints * BOJ open-ended asset purchases to come into effect in 2014 * BOJ doubles inflation target to 2 percent * Euro up vs dollar after surprise German ZEW jump NEW YORK, Jan 22 (Reuters) - The yen rose to a three-day high against the dollar on Tuesday after the Bank of Japan said its open-ended commitment to buy assets would kick in only next year, disappointing those who expected more aggressive monetary easing. The euro pared sharp losses against the yen and was last little changed against the dollar after a German ZEW survey showed that economic sentiment was at its highest since May 2012. Earlier the single currency had fallen to a session low against the dollar and yen on speculation that some large German banks could be asked to split their investment banking operations, driving European shares lower. But the biggest mover was the yen, with the Bank of Japan once again falling short of expectations. The yen rose in the aftermath, even as some traders said the move higher would be limited. "The BOJ, despite embarking on its boldest policy easing scheme to date, disappointed market participants by postponing action until 2014," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington. "But the medium trend lower for the yen remains intact." Japan's central bank, which has been under intense political pressure to overcome deflation, doubled its inflation target to 2 percent as had been widely expected. It also said it had decided to switch to an open-ended approach of buying a certain amount of assets each month next year, without setting a deadline for completing the purchases. The dollar was down 0.8 percent against the yen at 88.88 . Earlier it had fallen past reported stops at 88.50 yen to hit a session low of 88.35 yen. Traders cited bids at 88.00-88.20 yen while chart support was at its Jan. 16 low. The dollar had risen to 90.06 yen immediately after the BOJ decision, not far from its 2-1/2 year high of 90.25 yen, but later retreated. Some US$3.4 billion in yen changed hands through the global session on Tuesday, using Reuters Dealing data. The yen's recovery was likely to be short-lived, and the dollar would rise against the yen in the coming months, analysts said. "The general upward move in dollar/yen will continue due to expectations of more easing after a new BOJ governor is appointed in April," said Bernd Berg, global FX strategist at Credit Suisse, adding that the dollar could rise to 92 yen in the next few months. Current BOJ Governor Masaaki Shirakawa's term ends in April and markets are positioned for further yen weakness as most expect him to be replaced by someone whose stance on aggressive policy easing matches that of Prime Minister Shinzo Abe. EURO RECOVERS The euro was down 0.9 percent on the day at 118.26 yen, though off a session low of 117.31 yen. The euro was hurt againt the yen by a German newspaper report saying Germany's regulator had ordered large banks to simulate a break-up. Against the dollar, the euro was little changed at $1.3307 . While the euro has struggled to break above the $1.34 level since it hit a near 10-month high a week ago, strategists said it was likely to remain firm as concerns around the euro zone crisis ease. The German ZEW figures beat all expectations, a sign that the euro zone crisis was no longer hitting Europe's largest economy as hard as it was last year. "The euro can cross the $1.34 mark to reach $1.35 as early as the end of this week if data out of Germany continues to be strong," said Joerg Angele, FX strategist at Raiffeisen Bank International in London. But Commonwealth Foreign Exchange's Esiner cautioned that failing to breach $1.34 may mean a near term top is in place for the single currency. After European Central Bank President Mario Draghi's surprisingly upbeat press conference this month helped buoy the euro, the Bundesbank lent further support to the currency on Monday, saying Germany's economic slump had probably already bottomed out. That is likely to see currency speculators and long-term investors build bets in favour of the single currency in coming week, traders said.