Japanese stocks jumped and the yen skidded to six-year lows against the dollar on Friday after the Bank of Japan surprised markets with fresh easing steps - a move aimed at stoking inflation and recharging a fragile economic recovery.
The Nikkei stock average rallied 3.9 per cent after Japan's central bank said it would purchase more shares of exchange-traded funds and real estate investment trusts, and extend the duration of its portfolio of Japanese government bonds, to "pre-empt manifestation" of risks.
Data released early on Friday showed Japan's annual core consumer inflation slowed for a second straight month in September, adding to evidence the BOJ is likely to miss its price goal.
Before the BOJ's surprise, markets were chered by Wall Street's surge late in the session on Thursday, after data showed surprisingly strong third-quarter US economic growth as the trade gap narrowed. But domestic demand slipped, hinting at some loss of momentum.
The data came a day after the US Federal Reserve surprised markets with an optimistic assessment of the US economy when it announced the end of its monthly bond buying stimulus program.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.5 per cent, on track for weekly and monthly gains of more than 2 per cent.
Japanese shares also got a lift from news that Japan's Government Pension Investment Fund is poised to approve on Friday allocation targets which aim to raise the portion of Japanese shares to 25 per cent of its portfolio from the current target of 12 per cent, two government sources said.
"It's a surprise. The consensus was that GPIF would go to 20 per cent Japanese stocks. The impact of 25 per cent will be strong, with a positive impact for stocks," said Masayuki Doshida, senior market analyst at Rakuten Securities in Tokyo.
But data released before the market showed Japan's jobless rate rose in September and the availability of jobs fell for the first time in more than three years, suggesting the labour market is starting to lose some momentum. Japanese household spending also fell more than expected in September.
Against the yen, the dollar bought 110.29, up about 1 per cent on the day after rising as high as 110.31 yen
The euro edged down about 0.1 per cent to $1.2584.
In commodities trading, spot gold edged down about 0.3 per cent to $1,196.53 an ounce after plumbing a three-week low of $1,194.10 on Thursday.
Brent crude skidded about 0.4 per cent to $85.89 a barrel. Ample supplies and a stronger dollar have pushed prices down more than 9 per cent so far in October, and on track for their biggest weekly drop since May 2012.
Copyright: Thomson Reuters 2014
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