Tokyo stocks soared Friday as investors embraced sweeping new Bank of Japan stimulus measures that sent the yen plunging, spelling good news for the country's struggling exporters.
The scope of the BoJ action Thursday -- including doubling the money supply -- took some analysts and investors by surprise, despite expectations of major moves by the bank in its first meeting under new governor Haruhiko Kuroda.
The yen slumped against the dollar and euro after Thursday's announcement, the benchmark Nikkei jumped and bond yields hit a record low as Kuroda vowed no let-up in the battle against the decades of deflation.
The benchmark Nikkei finished the morning session up 3.76 percent, or 475.04 points, at 13,109.58, around highs not seen since August 2008 just before the global financial crisis rocked markets.
The Topix index of all first-section shares climbed 4.15 percent, or 43.02 points, to 1,080.78.
Shares were boosted by a tumbling yen, which sank to a three-and-a-half year low against the dollar. The greenback fetched 97.05 yen against 96.33 yen in New York late Thursday, and way up from 92.71 yen before the BoJ announcement.
The euro also jumped, trading at 125.43 yen against 125.20 yen in US trade and 119.66 yen earlier Thursday. Analysts said the Japanese currency would likely face further pressure Friday.
Investors have so far given a thumbs up to the economic policies of Prime Minister Shinzo Abe after he swept December elections on a pledge to kickstart Japan's struggling economy.
"Japanese stocks had long been undervalued, so the gain is justified," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp.
"But we also need to keep an eye on the downside of the fresh easing measures... We don't know where this gamble will take us."
Abe Friday applauded the action by the central bank, with local media quoting him as saying the market reaction was "exactly what the measures were expected to do".
However, some observers warned the unproven strategy could fail to meet its ambitious targets, while blowing out Japan's already-huge national debt.
"These are bolder steps than we had thought likely," said London-based Capital Economics.
"But the bank won't help itself in the long run if it makes promises it can't keep and here, we suspect, doubts will start to creep in."
Monetary easing tends to weaken a national currency, which makes Japanese goods more competitive overseas and lifts companies' foreign-earned profits when converted back to yen.
The weaker yen boosted major exporters in Tokyo, with Sony up 3.11 percent at 1,622 yen, Canon jumping 4.32 percent to 3,380 yen, Toyota rising 3.35 percent to 5,090 yen and industrial giant Hitachi soaring 5.08 percent to 558 yen.
"The increased appeal of Japanese shares to potential overseas investors, combined with renewed weakening of the yen should lift the market still higher," SMBC Nikko Securities general manager of equities Hiroichi Nishi told Dow Jones Newswires.
The BoJ plans to expand its asset-purchase programme to include riskier bets such as exchange-traded funds (ETFs) and real-estate investment trusts. ETFs are similar to an index fund, but are market traded like stocks.
It will also buy longer-term government bonds, a move aimed at pushing down long-term interest rates to encourage companies and individuals to borrow instead of hoarding their cash.
The bank said it wanted to boost the monetary base -- the amount of currency in circulation including commercial bank deposits in BoJ reserves -- by 60-70 trillion yen annually to 270 trillion yen by the end of 2014.