TOKYO, April 28 (Reuters) - Japanese stocks sank at the outset of afternoon trade on Thursday, after the Bank of Japan disappointed investors by holding off on expanding monetary stimulus, even as global headwinds, a strong yen and soft consumption threaten to derail a fragile economic recovery.
The Nikkei share average was 3 percent lower at 16,775.96 in early afternoon trading.
The benchmark index had ended the morning session 1.4 percent higher on hopes that the BOJ would provide some kind of easing following the U.S. Federal Reserve's decision to leave interest rates unchanged and a June rate-hike on the table.
"The market had clearly worked itself into a frenzy of expectations demanding that the BOJ take action and in retrospect that looks like a misguided view that failed to recognise the dilemma that recent economic dynamics have presented for the BOJ," said Stefan Worrall, director of Japan equity sales at Credit Suisse.
"The market's response is clearly one of disappointment but in the wake of the Fed decision the BOJ has perhaps taken the only sensible course of action by rightfully recognising that it's the Fed and interpretations of Fed policy outlook that is responsible for the fate of the yen, which may yet weaken without further action from the BOJ if the U.S. remains on the path to improvement."
The yen soared against the dollar and the euro after the BOJ's announcement.
The Tokyo Stock Exchange will be closed for a national holiday on Friday and the benchmark Nikkei index is now on track to end the shortened trading week 4.7 percent lower.
The broader Topix was 2.7 percent lower at 1,346.85 in early afternoon trade and on course to end the shortened trading week more than 4 percent lower.
The JPX-Nikkei Index 400 tumbled 2.9 percent to 12,170.94. (Editing by Jacqueline Wong)