Nikkei closes up 4.8% at seven-year high, yen falls to 6-year low after BOJ stuns with more stimulus

Tokyo shares soared 4.83 per cent to a seven-year high on Friday after the Bank of Japan ramped up its vast monetary easing programme, sending the yen into freefall. -- PHOTO: REUTERS
Tokyo shares soared 4.83 per cent to a seven-year high on Friday after the Bank of Japan ramped up its vast monetary easing programme, sending the yen into freefall. -- PHOTO: REUTERS

TOKYO (AFP) - Tokyo shares soared 4.83 per cent to a seven-year high on Friday after the Bank of Japan ramped up its vast monetary easing programme, sending the yen into freefall.

The benchmark Nikkei 225 index surged 755.56 points to 16,413.76, its best close since November 2007, while the Topix index of all first-section issues jumped 4.28 per cent, or 54.74 points, to 1,333.64.

BoJ policymakers said they would step up the pace of the central bank's asset-buying plan by as much as 20 trillion yen ($182 billion), bringing it to 80 trillion yen annually.

On forex markets, the yen plunged to an almost seven-year low of 111.0 against the US dollar following the BoJ's decision to pump even more money into the economy after a second-quarter contraction.

A weak yen is good for Japanese exporters as it makes them more competitive abroad and inflates their repatriated profits.

The Japanese unit was already heading south after data showed the US economy grew a better-than-expected 3.5 per cent in the three months to the end of September.

Friday's move is the first since the BoJ launched its huge bond-buying scheme in April last year as part of Tokyo's wider plan to conquer years of deflation and jumpstart the economy.

The BoJ on Friday also halved their economic growth outlook for the current fiscal year, citing lacklustre exports and slack consumer spending after an April sales tax rise dented activity. Itt now expects the world's third largest economy to expand 0.5 per cent in the year to March, well down from a 1.0 per cent growth forecast in July.

The world's number three economy is strugglling to pick up following an April sales tax hike that torpedoed a nascent recovery. The economy contracted 7.1 per cent on an annualised basis in the second of the year and there are fears of another downturn in July-September, which would technically put the country in recession.

Official figures showed Friday that September inflation slowed further, household spending plunged and unemployment rose, raising further questions about the government's recovery plan, which saw a painful sales tax hike in April.

Also in Japan a report in the Nikkei business daily said the country's public pension fund - the world's biggest - will double the amount of stocks it holds in its investment portfolio as it seeks out higher returns to cope with an ageing population.

Wall Street ended on a high after the US growth data, with the Dow surging 1.30 per cent, while the S&P 500 added 0.62 per cent and the Nasdaq gained 0.37 per cent.