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Japan Nikkei climbs as G7 agrees joint intervention Japan Nikkei climbs and yen weakens on G7 intervention
(about 2 hours later)
Japanese shares rose in early trading after Japan said the G7 finance ministers had agreed on joint intervention to stabilise the yen. Japanese shares have climbed and the yen weakened after finance ministers from the G7 group of the world's richest countries agreed to step into the currency market.
The main Nikkei 225 index rose 2.7% to 9,205.67 points. The Nikkei 225 stock index rose 2.7% to 9,205.67, while the yen weakened against the US dollar to 81.21.
The yen also weakened against the US dollar to 80.46, having risen to 76.25 yen on Wednesday, its highest level since the Second World War. The yen hit a post-World War II high of 76.25 yen earlier this week, raising concerns about Japan's recovery.
Japan's Finance Minister Yoshihiko Noda said the Bank of Japan had started intervention at 0900 (0000 GMT) Analysts said markets will remain volatile.
'Huge surprise' Also on Friday, the Bank of Japan said it would pump another 3tn yen ($38bn; £24bn) into the financial system, bringing the total cash injected by the bank this week to 37tn yen.
The G7 is a group of the world's seven richest nations, including the US, Japan and the UK. Big falls
G7 finance ministers had called for an emergency conference call to discuss how to deal with global market volatility and the impact of a stronger yen on the global recovery. Exporters gained the most from the G7's move, as a weaker yen makes their products cheaper to customers overseas.
While there was speculation that the group would give the go ahead to Japan to intervene in the foreign exchange markets, analysts have been surprised by a co-ordinated intervention. Semiconductor manufacturer Tokyo Electron rose 3.4%, while electronics group TDK was up 3%.
"This is a huge surprise," said Fredric Neumann of HSBC. The Nikkei has seen some of its most volatile trading in the past week.
He added that a co-ordinated effort by the biggest economies in the world will have bigger impact than action by the Japanese central bank alone. The index fell more than 16% over Monday and Tuesday, its biggest two-day fall for 23 years, before rebounding on Wednesday.
"Markets may doubt the effectiveness of individual central banks' intervention," he said. However, concerns about the strength of the yen pushed the index lower on Thursday.
"If several central banks step into the market in a co-ordinated fashion, it will undoubtedly have an effect." "The main things investors are worried about now are the nuclear plant, impact of the earthquake and tsunami on firms and power cuts putting pressure on Japanese manufacturers," said Norihiro Fujito at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
However, following the decision by the G7 to intervene in the currency markets, the focus may now shift away from the yen.
Not least because there there are plenty of other concerns occupying investors, analysts said.
Nuclear shut-down
The crisis in Japan has also had an impact on the price of oil.
Earlier this week, the price fell on expectations of weaker short-term demand following the shut-down of some of the country's industrial capacity.
However, with focus turning towards the prospect of increased energy imports to compensate for the shortfall in nuclear power following the closure of 11 reactors, and towards potential supply problems in the Middle East, the oil price is rising once again.
On Thursday, US light crude rose more than $1 a barrel to $116.11, while Brent crude rose $1.59 to $103.98.