* Asian stock markets: tmsnrt.rs/2zpUAr4
* Fed cuts rates as expected but signals pause
* BOJ likely to keep policy on hold on Thursday
* Policymakers struggle to deal with risks to growth
By Stanley White
TOKYO, Oct 31 (Reuters) - Asian shares rose on Thursday and U.S. stock futures edged higher after the U.S. Federal Reserve cut interest rates as expected to keep economic expansion on track.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2%. Japan's Nikkei stock index rose 0.41%, but Australian shares fell 0.24%.
U.S. Treasury yields extended declines in Asia after the rate cut, but further declines may be limited as Fed Chairman Jerome Powell signalled additional rate cuts are unlikely because there are several areas of strength in the U.S. economy.
The yen held steady versus the dollar before a Bank of Japan policy meeting later on Thursday. The BOJ is expected to keep its ultra-easy monetary policy in place, but the decision could be a close call.
Debate at the Fed and the BOJ highlights the struggle that many central banks are facing.
The U.S.-China trade war and Britain's divorce from the European Union have increased uncertainty, but central banks are somewhat reluctant to ease policy aggressively because interest rates are already very low in many major economies.
"The biggest thing that stands out is stocks look stronger after the Fed," said Tsutomu Soma, general manager of fixed income business solutions at SBI Securities in Tokyo.
"Risks like U.S.-China or Brexit haven't been resolved completely, but the markets are starting to look beyond these risks. The BOJ is likely on hold, so it will be difficult for currencies to react."
U.S. stock futures nudged 0.07% higher on Thursday in Asia after the S&P 500 rose 0.33% to close at a record high on Wednesday for the second time in three trading sessions.
The Fed lowered its policy rate to 1.50%-1.75%, but dropped a previous reference in its statement to "act as appropriate" to sustain the economic expansion.
In his news conference, Powell listed several reasons why he feels the economy is doing well, such as robust consumer spending, strengthening home sales, and healthy asset prices.
The yield on benchmark 10-year Treasury notes fell to 1.7838% in Asia on Thursday, while the two-year yield eased slightly to 1.6076%.
The dollar index against a basket of six major currencies fell 0.22% to 97.427, extending declines from Wednesday.
The yen was little changed at 108.80 per dollar as traders awaited the outcome of the BOJ meeting.
Japan's central bank may trim its consumer price forecasts but leave policy unchanged due to hopes that progress in scaling back a U.S.-China trade dispute will give it room to save its dwindling policy tools.
Optimism that Washington and Beijing will sign a preliminary agreement to call a truce to their 16-month trade war was also a factor behind the Fed's decision to signal that further rate cuts are on hold, highlighting the importance of trade talks to global monetary policy.
In the energy market, oil futures extended declines on Thursday as a massive buildup in U.S. crude stock piles reinforced concerns about oversupply in the world's energy markets.
U.S. crude fell 0.29% to $54.90 per barrel.
Crude inventories, excluding the Strategic Petroleum Reserve SPR, rose 5.7 million barrels in the week to Oct. 25, the Energy Information Administration said on Wednesday.
This blew past analysts' expectations for a 494,000-barrel build. (Reporting by Stanley White; editing by Richard Pullin)