* Nikkei up 1.8 pct after BOJ easing
* BOJ move welcomed but strong yen limits climb -fund manager
* Property shares up on short-covering on BOJ purchase plan
* BOJ purchase of ETFs would support stock market -analyst
By Aiko Hayashi and Chikafumi Hodo
TOKYO, Oct 6 (Reuters) - Japan's Nikkei average rose 1.8 percent to a two-month closing high on Wednesday as the Bank of Japan's credit easing measures the day before continued to induce strong inflows, especially in the financial and property sectors.
Still, the continuing strength of the yen weighed on shares of manufactures, such as Toyota Motor which fell 0.8 percent, capping the Nikkei average.
The BOJ pledged to pump more funds into the struggling economy and to keep rates virtually at zero, sending the benchmark Nikkei 1.5 percent higher on Tuesday.
Shares of the financial sector jumped, along with the property sector after the BOJ announced a plan to set up a 5 trillion yen ($60 billion) fund to buy a wide range of assets including Japanese real estate investment trust (J-REITs).
"The BOJ's series of measures have clearly lifted sentiment and have induced steady short-covering in stocks, but the ongoing strength of the yen is limiting active follow-through moves," said Naoki Fujiwara, fund manager at Shinkin Asset Management.
"The yen is the key driver in the stock market now. The fate of the yen will be decided by the Federal Reserve's monetary policy," Fujiwara said.
The benchmark Nikkei gained 172.67 points to 9,691.43 -- its highest close since Aug. 3, while the broader Topix rose 1.4 percent to 844.50.
The yen stayed strong, holding near a 15-year high against the dollar on heightened expectations of quantitative easing from the U.S. central bank following the BOJ's rate cut.
Comments by Chicago Fed President Charles Evans that the Federal Reserve should do much more to spur the economy also increased speculation over a possible resumption of the bank's quantitative easing as soon as its next policy-making meeting scheduled on Nov. 2 and 3.
"The most important focus seems to have been aimed at currencies but the yen hasn't weakened against the dollar, and that's keeping a lid on further stock gains," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.
"Rather, the yen is staying on the strong side due to expectations that the U.S. Federal Reserve might announce a larger-scale easing."
Trade was active on the Tokyo Stock Exchange's first section, with 2.88 billion shares changing hands, its highest volume in five months. Advancing stocks outnumbered declining ones by more than 2 to 1.
REAL ESTATE, FINANCIAL STOCKS SHINE
The BOJ's fund is designed to cover Japanese government bonds, treasury bills, commercial paper, asset-backed commercial paper, corporate bonds, exchange-traded funds (ETF) and J-REITs.
Of the 5 trillion yen pool, about 500 billion yen will go into ETFs and REITs.
"Buying of assets such as REITs wasn't really expected and that's sparking short-covering in property shares," Ichiyoshi Investment's Akino said. "But the size of the purchases is rather small and unless it is expanded, the impact on the overall market will likely continue to be limited."
Active buying buoyed shares of property developers such as Mitsubishi Estate, which rose 4.2 percent to 1,476 yen.
The real estate sector subindex was up 4.2 percent.
Shares of financial companies also climbed, with Nomura Holdings jumping 6.9 percent to 435 yen and Mizuho Financial Group climbing 8.6 percent to 126 yen.
"Sentiment towards stocks has improved but no major fresh buying has been detected. Banks have jumped in response to credit easing, while I feel gains in real estate shares have been a bit overdone," Shinkin Asset's Fujiwara said.
Kaoru Arai, general manager at Rakuten Securities, said the BOJ's purchases of ETFs were likely to be limited to major Japanese stock indexes such as the Nikkei 225 and Topix, with no investments expected in commodities or foreign ETFs.
"The BOJ's purchases of Japanese ETFs will help to provide support to Nikkei 225 and Topix prices," he said.
"The volume of ETF purchases by the central bank may not be large but this will be an important way for the BOJ to get access to the stock market and support stock prices."
Exchange-traded products issue securities backed by physical assets such as stocks or commodities, giving investors exposure to the underlying prices.
There are 93 ETFs listed on the Tokyo Stock Exchange and 14 listed on the Osaka Securities Exchange. ($1=83.24 Yen) (Editing by Joseph Radford)