The Stoxx 600 index was down 0.36% in early trade, with media and tech stocks shedding some of Thursday's strong gains to fall 1.4% and 1.3%, respectively.
Japan's strict yield curve control policy will now allow movements in the range of around plus and minus 0.5% without "rigid limits," the central bank said.
The central bank also offered to buy 10-year bonds at 1% every business day through fixed-rate operations, effectively expanding its tolerance by another 50 basis points.
The unexpected move rattled Asia-Pacific markets, with Japan's Nikkei 225 falling by over 2%, the yen gaining and the 10-year bond yield rising to its highest level since September 2014.
Global markets are also sensitive to monetary policy moves in Japan, due to its longstanding status as the world's biggest creditor nation.
Persons:
— CNBC's Clement Tan, Sumathi Bala
Organizations:
Bank of Japan, Japan's Nikkei, European Central Bank, Dow Jones
Locations:
Asia, Pacific, Japan