The yen fell and world stocks rose on Tuesday after the Bank of Japan's surprising and aggressive action to pump more funds into the flagging economy, though gold hit a record high on fears of long-term inflation.
The BOJ's measures — cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets — pushed up the Nikkei average to close 1.5 percent higher.
The announcement came after Federal Reserve Chairman Ben Bernanke said on Monday that more asset purchases could further ease financial conditions.
"A surprise move by the Bank of Japan shows the authorities will be working hard to ensure a recovery will be supported," said Henk Potts, strategist at Barclays Wealth in London.
The dollar was up 0.1 percent at 83.40 yen after climbing as high as 83.99 on the BOJ decision, but was down 0.5 percent against a basket of major currencies after hitting an 8-1/2-month low.
The prospect of further quantitative easing from the Fed also supported U.S. Treasury prices, and the benchmark 10-year yields were down 2 basis points to 2.4597 percent.
Central banks in Japan, the United States and Britain have been under political pressure to do more to support economies showing only tepid recovery from the worst recession in decades.
In Japan, slowing export growth, a surprise fall in factory output and companies' worries about the strong yen have strengthened the case for the BOJ to ease policy. Last month the authorities intervened in the currency market to curb the yen's strength.
The U.S. currency has fallen 10 percent this year against the yen, which tends to strengthen when concerns mount over global growth.
The Australian dollar fell 0.9 percent to $0.9594 after its central bank left interest rates steady for a fifth month, confounding expectations of a rise. Australian stocks eased 0.4 percent.
In Europe, the FTSEurofirst 300 index advanced 0.3 percent, also helped by a rise in British services activity.
Ireland's benchmark put on 0.6 percent, shrugging off Moody's Investors Service's warning that it may cut the country's credit rating again, citing the huge bill for cleaning up its banks announced last week.
U.S. stock index futures rose 0.2 to 0.3 percent, indicating a firmer start for Wall Street.
World stocks measured by the MSCI All-Country World Index added 0.3 percent, while the Thomson Reuters global equity index fell 0.3 percent. The euro rose 0.7 percent to $1.3782 and was up 0.8 percent at 114.92 yen.
The single currency is benefiting from a gradual withdrawal of liquidity support measures by the European Central Bank, contrary to the BOJ and the thinking of the Fed.
"It seems everyone is trying to stop their currency from appreciating except Europe," Societe Generale currency strategist Kit Juckes said.
Gold was pushed higher by concern about more monetary easing and possibly higher long-term inflation, and hit a record high at $1,328.05 an ounce. Oil prices rose 0.5 percent to just below $82 a barrel.
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