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Japan's Nikkei tops 13,000 for first time since 2008 Japan's Nikkei tops 13,000 for first time since 2008
(about 1 hour later)
Japan's stock market has hit its highest level in almost five years, after a central bank stimulus plan raised hope of economic revival.Japan's stock market has hit its highest level in almost five years, after a central bank stimulus plan raised hope of economic revival.
The main Nikkei 225 stock index climbed as much as 4.7% to 13,225.62, its highest since August 2008.The main Nikkei 225 stock index climbed as much as 4.7% to 13,225.62, its highest since August 2008.
The Bank of Japan said on Thursday it would double the country's money supply to spur growth and halt falling prices.The Bank of Japan said on Thursday it would double the country's money supply to spur growth and halt falling prices.
The step was much bigger than expected and signalled a more aggressive approach towards driving growth.The step was much bigger than expected and signalled a more aggressive approach towards driving growth.
At the same time, the Japanese yen extended losses against the US dollar on Friday, and has taken its decline to 4.5% in the past two days. Analysts said that the moves by the central bank had got the attention of investors both at home and abroad.
By pumping more money into the system, Japan is seen as aiming to weaken its currency and boost exports. "Many investors who were not even interested in Japan before have opened their eyes," said Tetsuro Ii, chief executive of Commons Asset Management.
At the same time, it hopes to promote price growth, ending a cycle of deflation, recession and sputtering economic recovery. "They realised that if they continue to look at Japan the way they did before, they are going to lose."
Economists believe more than a decade of deflation in Japan has contributed to a stagnant economy. Yen factor
By pumping more money into the system, Japan is hoping to promote price growth, ending a cycle of deflation, recession and sputtering economic recovery.
At the same time, it is also seen as an attempt to weaken its currency and boost exports.
The moves by the central bank have certainly had the desired impact on the Japanese currency.
The Japanese yen extended losses against the US dollar on Friday, and has taken its decline to 4.5% in the past two days.
It was trading close to 97.12 yen against the US dollar in Asian trade.
The yean has also dipped more than 5% against the euro over the past two days and was trading at nearly 125.5 yen to a euro on Friday.
Analysts said the aggressive action taken by the central may see the yen continue to remain weak in the coming months.
"The big party we are having in the markets now is, of course, the financials. Banks are getting more money for free, utilities with big investment projects are getting zero cost capital now," said Martin Schulz from Fujitsu Research Institute."The big party we are having in the markets now is, of course, the financials. Banks are getting more money for free, utilities with big investment projects are getting zero cost capital now," said Martin Schulz from Fujitsu Research Institute.
"The big story, and the lasting story, will be the exporters. A weaker yen helps the exporters to earn money with Japanese technology in Asian markets in particular.""The big story, and the lasting story, will be the exporters. A weaker yen helps the exporters to earn money with Japanese technology in Asian markets in particular."
Global shift?Global shift?
On Thursday, the Bank of Japan embarked on what some are calling a new era of monetary easing.On Thursday, the Bank of Japan embarked on what some are calling a new era of monetary easing.
It will increase its purchase of government bonds by 50tn yen ($520bn; £350bn) annually. Analysts said that was the equivalent of almost 10% of Japan's gross domestic product, or total economic output, for the year.It will increase its purchase of government bonds by 50tn yen ($520bn; £350bn) annually. Analysts said that was the equivalent of almost 10% of Japan's gross domestic product, or total economic output, for the year.
BOJ governor Haruhiko Kuroda defended the size of the stimulus saying the inflation target of 2%, called for by the government, would remain out of reach if the central bank continued its incremental steps.BOJ governor Haruhiko Kuroda defended the size of the stimulus saying the inflation target of 2%, called for by the government, would remain out of reach if the central bank continued its incremental steps.
The Bank of Japan's new boss has said he will "do whatever it takes" to drive growth, a stance that has the backing of the country's also recently appointed prime minister.The Bank of Japan's new boss has said he will "do whatever it takes" to drive growth, a stance that has the backing of the country's also recently appointed prime minister.
Their decision to spend Japan out of its economic troubles will be closely watched by other countries, correspondents say.Their decision to spend Japan out of its economic troubles will be closely watched by other countries, correspondents say.
First, there is keen interest in whether or not the government and central bank can work closely together and make a success of their stimulus policies, especially as they mark a significant change in economic direction.First, there is keen interest in whether or not the government and central bank can work closely together and make a success of their stimulus policies, especially as they mark a significant change in economic direction.
Second, there is likely to be close scrutiny from Japan's trading partners and rivals of how far the yen declines.Second, there is likely to be close scrutiny from Japan's trading partners and rivals of how far the yen declines.
Analysts said competitors were unlikely to sit quietly if their products became uncompetitive and Japan's attempts to boost growth complicated or compromised their own economic stability and success.Analysts said competitors were unlikely to sit quietly if their products became uncompetitive and Japan's attempts to boost growth complicated or compromised their own economic stability and success.