* Yen falls after BOJ announces new funding operations
* BOJ's Shirakawa: Low rates will have long-term yen impact
* Dollar down on risk demand, Aussie up after RBA rate rise
(Adds comment, updates prices)
By Jamie McGeever
LONDON, Dec 1 (Reuters) - The yen fell broadly on Tuesday after the Bank of Japan announced more monetary policy easing measures to fight deflation and help the ailing economy, while holding interest rates at 0.1 percent.
The BoJ's decision at an emergency meeting to inject more liquidity into the financial system via the provision of three-month funds at rock-bottom rates helped boost broader risk appetite, also denting sentiment toward the U.S. dollar.
Currencies other than the ultra low-yielding yen and dollar mostly strengthened, and other growth-related assets like stocks and commodities rose. More clarity about the debt situation in Dubai also eased some concerns about the region's stability.
"The two primary funding currencies, the dollar and yen, are performing badly today versus non-quantitative easing currencies and higher-yielders," said Stephen Gallo, head of FX analysis at Schneider FX in London.
"The moves by the BoJ caused a big shakeout of long yen positions, and a weaker yen has helped asset price movements elsewhere ... as the weak yen to a degree -- but maybe not as much as dollar -- drives the risk trade," Gallo said.
The yen pared some losses, however, as the BOJ's move to surprised some in the market who had expected bolder policy steps such as expanding purchases of government bonds to push yields down.
At 1230 GMT the dollar traded 0.6 percent higher on the day at 86.90 yen, having hit 87.54 yen earlier in the day.
The euro rose 1 percent to 130.90 yen, while higher-yielding currencies including the Australian and New Zealand dollar rallied as much as 2 percent versus the yen.
Against the dollar, the euro rose 0.4 percent to $1.5065. The dollar index fell half a percent to 74.52, while European share prices rallied 2 percent.
The Australian dollar, meanwhile, rose nearly 1 percent on the day to $0.9230, boosted after the Reserve Bank of Australia raised interest rates by 25 basis points to 3.75 as expected on Tuesday in its third consecutive hike.
Dubai World, the conglomerate at the centre of rising concerns about the once-booming emirate's debt position, eased some woes about the Gulf region's financial health with an announcement on restructuring late on Monday.
INTERVENTION THREAT FADES?
The dollar has suffered against the yen, hitting 84.82 yen late last week for the first time since mid-1995, as dollar interbank borrowing costs have fallen below yen ones this year.
The BOJ said it will provide 10 trillion yen in three-month funds at a fixed rate of 0.1 percent in a bid to enhance monetary easing by trying to bring down longer-term rates.
Political pressure on the BOJ to avert recession has grown, but Tuesday's decision is seen as a way to avoid a return to a narrow form of quantitative easing, under which the BOJ slashed rates to zero and flooded markets with cash in 2001-2006.
"The message is that the BOJ isn't completely indifferent to currency rates, and this should at least be marginally yen- negative," said Adam Cole, global head of currency strategy at RBC in London, while acknowledging the yen's initial reaction to the comments had been limited.
But many analysts expect more yen strength against the dollar so long as U.S. interest rates also remain essentially at zero too, and that the prospects of yen-weakening intervention by Japan remains low given the dollar's overall weakness.
"The FX intervention threat might be renewed later today but will remain with little affect, since yen-weakening intervention will have to remain unilateral, unlikely to be joined by the Europeans who see the euro trading at too high a level," said BNP Paribas strategists in a note on Tuesday.
"Meanwhile, the U.S. will have little appetite for intervention as its economy is weak," they added.
((Reporting by Naomi Tajitsu and Jamie McGeever; editing by Patrick Graham; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net; +44 207 542 8510))