GLOBAL MARKETS-Treasury yields, dollar fall after U.S. data; yen flat in wake of BOJ

(Recasts with early activity in U.S. markets, adds details, changes dateline from LONDON)

By Caroline Valetkevitch

NEW YORK, Jan 18 (Reuters) - U.S. 10-year Treasury yields slipped to a four-month low and the U.S. dollar index declined on Wednesday as data showed U.S. retail sales fell more than expected in December, while the yen was little changed in the wake of the Bank of Japan's decision to maintain ultra-low interest rates.

A global stock index was up, but Wall Street stocks were little changed after opening higher.

The drop in U.S. retail sales, together with subsiding inflation, could encourage the Federal Reserve to further scale back the pace of its interest rate increases next month.

A separate report showed U.S. producer prices also fell more than expected in December.

Earlier, the Bank of Japan maintained its ultra-easy policy, including a bond yield cap, defying market expectations it would phase out its massive stimulus program because of increasing inflation pressures.

The decision caused the yen to fall, with investors unwinding bets based on expectations the central bank would overhaul its yield control policy.

But in late-morning U.S. trading, the dollar was little changed against the yen. The U.S. dollar index was down 0.5%.

"The PPI and retail sales numbers show that there are disinflationary pressures going on," said Juan Perez, director of trading at Monex USA in Washington.

The Japanese 10-year yield also earlier plunged as much as 14 basis points to 0.36%, which would have been the biggest one-day decline since September 2003, before edging back up to 0.41%. The yield was at 0.51% prior to the BOJ decision.

On Wall Street, the Dow Jones Industrial Average fell 123.72 points, or 0.36%, to 33,787.13, the S&P 500 lost 1.74 points, or 0.04%, to 3,989.23 and the Nasdaq Composite added 13.50 points, or 0.12%, to 11,108.61.

The pan-European STOXX 600 index rose 0.44% and MSCI's gauge of stocks across the globe gained 0.30%.

Benchmark 10-year notes fell to 3.375%, the lowest since Sept. 13. Two-year yields reached 4.072%, the lowest since Oct. 4. The yield spread between two-year and 10-year notes was last a minus 72 basis points.

In the energy market, U.S. crude recently rose 1.92% to $81.72 per barrel and Brent was at $87.21, up 1.5% on the day.

The U.S. Justice Department said it will "announce a major, international cryptocurrency enforcement action" on Wednesday.

Bitcoin was last down 0.7%.