By Chikako Mogi

TOKYO (Reuters) - Japanese stocks slumped and commodities were mostly lower on Wednesday, extending an overnight global selloff in equities, as the absence of fresh steps from the Bank of Japan to quell turbulence in the domestic bond market and lingering fears of an eventual softening of U.S. stimulus unnerved investors.

U.S. stocks slipped in a volatile session while European shares fell to six-weeks lows on Tuesday on concern that central bank support for markets was turning more cautious, as the BOJ's move came amid persistent speculation about the U.S. Federal Reserve toning down its strong stimulus commitment later in the year.

The possibility of a shift in the Fed's current policy, even if such a move wasn't imminent, has rattled markets in recent weeks as the Fed's aggressive bond-buying plan has been a major driving force behind the recent rally in global risk assets.

"Market reactions of late underscore the liquidity risk -- bond buying schemes are reducing liquidity in bond markets and overshooting prices," said Takeo Okuhara, fund manager at Daiwa SB Investments. "Markets have long been too complacent with central bank support."

Japan's Nikkei stock average <.n225> fell as much as 2.4, after skidding 1.5 percent on Tuesday. The Nikkei is down about 10 percent from a 5-1/2-year high scaled last month. <.t></.t></.n225>

"Although investors were already frustrated after yesterday's BOJ outcome, the bad mood was exacerbated by the negative reaction overseas," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was down 0.1 percent, hovering around the 6-1/2-month low hit on Tuesday when the index fell for a fifth straight day of declines to mark its longest losing streak in nearly three months.</.miapj0000pus>

Australian shares <.axjo> fell 0.9 percent to a five-month low while South Korean shares <.ks11> inched down 0.1 percent. Markets in China and Hong Kong are closed for holidays.</.ks11></.axjo>

The BOJ on Tuesday held off from taking additional steps to curb bond market volatility, arguing that bond markets had stabilized. BOJ Governor Haruhiko Kuroda said that the central bank will consider fresh measures if borrowing costs spike again in the future.

The lack of new action, following an unprecedented bond-buying program launched in April, disappointed some investors who were expecting the central bank to extend the maximum duration of cheap fixed-rate funds as a way to reduce volatility in the bond market.

GLOBAL GROWTH, STIMULUS WORRIES MOUNT

The tumult in the Japanese bond market has raised concerns that it could undercut the BOJ's ultra-easy monetary policy and deal a blow to the government's campaign to revive the world's third-biggest economy.

The dollar was up 0.5 percent to 96.51 yen after falling more than 2 percent on the day to a low of 95.59 yen overnight, approaching a two-month low of 94.975 touched on Friday. Just last month, the U.S. currency hit a 4-1/2-year peak of 103.74 against the yen, underpinned by the BOJ's massive stimulus.

Markets have been on edge even before the latest BOJ decision rippled through asset markets. Volatility in global financial markets had heightened in recent weeks on the Fed stimulus jitters, worries over slowing growth in China, a deep slump in Europe, and tumult in Japanese bonds and stocks.

Sentiment towards Japan has also been hit recently as investors began to wind down their excessive expectations for Prime Minister Shinzo Abe's pro-growth policies, suspecting that Abe might be holding off from announcing harsher structural reforms needed to invigorate Japan until after an election in July.

Since mid-November when expectations began building for Abe, who became prime minister in December, to pursue bold stimulus measures to pull Japan out of deep deflation, the dollar rose 30 percent against the yen and the Nikkei surged almost 80 percent to their respective peaks in May.

"Markets have yet to find a new focus that replaces the trading betting on Abe, which appears to be closing out. The next focus is not Japan, maybe the Fed, but in the absence of clear fresh factors, each asset may be undergoing position adjustments under the current volatile conditions," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

Commodities were hurt more by the prospect of the Fed reducing its stimulus.

London copper was up 0.1 percent to $7,075 a metric ton (1.1023 tons), hovering near a six-week low.

U.S. crude futures fell 0.6 percent to $94.78 a barrel and Brent eased 0.4 percent to $102.57.

Spot gold extended declines into a second session, easing 0.1 percent to $1,377.05 an ounce, as investors continued to consider the risk of the Fed curbing its stimulus program.

Similar concerns have been behind a recent spike in U.S. Treasury yields to their highest in more than a year.

(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Shri Navaratnam)

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