By PAN PYLASAP Business Writer
LONDON (AP) - Japanese stocks outperformed all others for the second day running Thursday while the yen sank after the country's central bank announced a bold new approach to fixing the economy.
In the run-up to policy decisions from Europe's two main central banks, the Bank of Japan, under new Governor Haruhiko Kuroda, surprised by announcing that it would expand money supply massively to stoke inflationary pressures in the country and get the economy out of its two-decade stagnation.
At the end of a two-day meeting, the central bank said it would double the money supply through the purchase of government bonds and other measures. Kuroda has vowed to do whatever necessary to break Japan's economy out of its deflationary slump - falling prices have crippled growth in the world's No. 3 economy for the past two decades.
"Despite speculation earlier in the week over the possibility that not all of the BoJ policy committee were on board with the ultra-accommodative plans of new Governor Kuroda, the latter has still managed to pull a rabbit out of the hat and surprise the markets," said Jane Foley, senior currency strategist at Rabobank International.
The announcement turned around Japan's main Nikkei 225 stock index, which at one stage was trading over 2 percent lower, as well as piling the pressure on the yen, as investors priced in the prospect of more money floating around the Japanese economy.
The Nikkei ended 2.2 percent higher to close at 12,634.54 while the dollar was trading 2.8 percent higher at 95.52 yen.
The developments in Japan helped shore up markets elsewhere.
In Europe, Britain's FTSE 100 fell 0.1 percent to 6,416 while Germany's DAX rose 0.4 percent to 7,904. The CAC-40 in France was 0.8 percent higher at 3,784.
The focus in Europe will turn to policy announcements from the European Central Bank and the Bank of England. Neither is expected to make any changes though investors will be interested to hear what ECB president Mario Draghi says in his ensuing press conference, especially when it comes to the recent crisis in Cyprus.
"The market consensus is for the BoE and ECB later this morning to leave policy on hold but the economic situation in both the UK and eurozone warrants further monetary easing in our view," said Neil MacKinnon, global macro strategist at VTB Capital.
Wall Street appeared headed for a higher open following a disappointing session on Wednesday when traders were spooked by some soft U.S. economic figures - Dow futures were up 0.4 percent and the broader S&P 500 futures trading 0.5 percent higher.
Traders in the U.S. will have one eye on Friday's nonfarm payrolls figures for March, a data series that often sets the market tone for a week or two after their release.
The advance in Tokyo didn't ripple around Asia, however. South Korea's Kospi dropped 1.2 percent to 1,959.45 as bellicose rhetoric between North Korea and the U.S. rattled the local market. Early Thursday, North Korea warned that its military has been cleared to attack the U.S. though experts say the North has not demonstrated that it has missiles capable of long range or accuracy. Washington said it was working to defuse the situation.
Australia's resource-heavy S&P/ASX 200 lost 0.9 percent to 4,913.50, hurt by drops in commodities prices. Hong Kong and mainland Chinese markets were closed for a public holiday.
Oil prices were flat, with the benchmark New York rate up a cent at $96.46 a barrel.
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