* BOJ to charge 0.1 pct interest on cash in BOJ account
* Dollar/yen initially jumps 2 pct, later pares gains
* BOJ keeps base money target unchanged at 80 trln yen (Adds comments, updates prices)
By Masayuki Kitano
SINGAPORE, Jan 29 (Reuters) - The yen was weaker on Friday after the Bank of Japan's stunning announcement it was adopting a negative interest rate policy, though some of the currency's initial sharp losses were pared.
The Japanese central bank's action comes as investors around the world have been swept up by turmoil in markets amid fears of slackening global growth, a collapse in oil prices and wobbles in China's economy. That has increased headwinds against the BOJ's 2 percent inflation goal.
The BOJ said it was adopting a negative interest rate of minus 0.1 percent to current accounts that financial institutions hold with it.
Also, the BOJ said it will cut interest rates further into negative territory if judged necessary. dollar jumped by more than 2 percent against the yen at one point to 121.495 yen, the greenback's highest level in more than a month.
It later came off such highs, however, and was last trading at 120.30 yen JPY= , up 1.2 percent on the day.
"The dollar initially climbed above 121 yen due to the negative interest rate surprise," said Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo.
However, a sticking point is that the BOJ's new policy, which effectively charges financial institutions for parking excess reserves is not very compatible with quantitative easing, as can be seen from the fact the BOJ kept its monetary base target unchanged, Kureda said.
"I don't think this (move) is necessarily being viewed in a positive manner," he said, referring to the reaction among market participants.
The BOJ said it would conduct money market operations so that the monetary base will increase at an annual pace of 80 trillion yen ($675 billion).
"Yes, the BOJ has surprised with the introduction of negative interest rates. However, we note that it is made on a marginal majority vote of 5 vs 4," said Heng Koon How, senior FX strategist for Credit Suisse (VX:CSGN) private banking and wealth management in Singapore.
"We now eagerly await (Governor Haruhiko) Kuroda's press conference for more details. At this stage, our JPY view stays positive," Heng said.
"Irrespective of this surprise easing from the BOJ, the yen remains rather undervalued, especially after this knee-jerk fall past 120. It remains to be seen if this yen move is sustainable," he added.
While the yen came off earlier lows, its was still broadly weaker on the day.
The euro rose 1 percent to 131.29 yen EURJPY=R , having risen to as high as 132.45 yen earlier.
Against the dollar, the euro eased 0.2 percent to $1.0913 EUR= . (Editing by Richard Borsuk)