Tokyo stocks soared Friday, hitting record volumes as investors embraced sweeping new Bank of Japan stimulus measures which sent the yen plunging, spelling good news for the key export sector.
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 that has weighed on the world's third-largest economy.
The Nikkei soared over four percent in early Friday trade, past 13,100 to intraday highs last seen in August 2008 just before the global financial crisis rocked markets.
It ended Friday's session up 1.58 percent, or 199.10 points, to 12,833.64 on its biggest volume since the Tokyo Stock Exchange opened in 1949, with 6.45 billion shares changing hands.
The broader Topix index of all first-section shares jumped 2.74 percent, or 28.48 points, to finish at 1,066.24.
Shares were boosted by a tumbling yen, which sank to a three-and-a-half year low against the dollar, with the greenback buying 96.35 yen against 96.33 yen in New York late Thursday, after jumping as high as 97.05 yen earlier Friday. The dollar was trading below 93 yen before the BoJ announcement.
The euro bought 124.59 yen from 125.20 yen in US trade, after soaring to 125.43 yen in earlier Tokyo trade on Friday.
Monetary easing tends to weaken yen, which makes Japanese goods more competitive overseas and lifts companies' foreign-earned profits when converted back to yen.
Investors have so far given a thumbs up to the economic policies of Prime Minister Shinzo Abe, dubbed "Abenomics", after he swept December elections on a pledge to kickstart Japan's lumbering 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 on Friday applauded the BoJ, with Japanese media quoting him as saying the market reaction was "exactly what the measures were expected to do".
Kuroda, meanwhile, brushed off worries of an asset-price bubble, a big fear in Japan after the last two decades of limp growth followed a huge stock and real-estate bubble in the late 1980s.
Boston University professor William Grimes warned there "are no guarantees" after years of tepid policy action from the central bank.
"Deflationary expectations are much more firmly entrenched among Japanese companies and consumers (now)," he said.
"Also, Japan's fiscal situation has become much worse."
Japan, which has proportionately the worst debt load among industrialised nations, has been wrestling with falling prices for years, putting the brakes on growth because it encourages people to put off buying goods in the hopes of paying less down the road and hurting producers in the process.
In Tokyo stock trading, exporters gained with Sony finishing up 0.44 percent to 1,580 yen, while Canon jumped 1.54 percent to 3,290 yen, Toyota rose 3.35 percent to 5,090 yen and industrial giant Hitachi finished up 3.01 percent to 547 yen.
Among the BoJ measures are expanding 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 also plans to double the nation's money supply and 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.