BANGKOK (AP) — Japan's benchmark stock index surged to its highest level in more than four years Friday, its second straight day of big gains after the central bank announced aggressive action to lift the economy out of a prolonged slump. European stocks fell in early trading.
The Bank of Japan unveiled plans Thursday to pump huge amounts of money into the financial system in order to spur price rises, spending and borrowing in an economy that has stagnated for years. The central bank said it wanted to double the money supply and achieve a 2 percent inflation target within about two years.
The sweeping shift in monetary policy came as a surprise to analysts, even though the BOJ's new governor Haruhiko Kuroda had vowed to do whatever necessary to break Japan's economy out of its deflationary malaise. Falling prices have stunted growth in the world's No. 3 economy for the past two decades.
"The size of monetary easing announced yesterday far exceeded expectations," said analysts at DBS Bank Ltd. in Singapore in a commentary.
The BOJ's plans include buying $530 billion a year in government bonds. Kuroda described the scale of monetary stimulus as "large beyond reason," but said the inflation target would remain out of reach if the central bank stuck to incremental steps.
Mark Williams, chief Asia economist at Capital Economics, said that the BOJ's credibility rests on the success of the new direction the bank is taking.