Yen sinks, Nikkei surges on big Japanese stimulus

LONDON Japanese stocks outperformed all others for the second day running Thursday while the yen sank after the country's central bank announced a bold new approach to fixing the economy.

The Bank of Japan, under new Governor Haruhiko Kuroda, surprised by announcing it would expand money supply massively to stoke inflation and get the economy out of its two-decade stagnation. There were no surprises from the European Central Bank and the Bank of England, however, when they kept monetary policy unchanged.

At the end of a two-day meeting, the Japanese central bank said it would double the money supply through the purchase of government bonds and other measures. Kuroda has vowed to do whatever necessary to break Japan's economy out of its deflationary slump -- falling prices have crippled growth in the world's No. 3 economy for the past two decades.

"Despite speculation earlier in the week over the possibility that not all of the BoJ policy committee were on board with the ultra-accommodative plans of new Governor Kuroda, the latter has still managed to pull a rabbit out of the hat and surprise the markets," said Jane Foley, senior currency strategist at Rabobank International.

The announcement turned around Japan's main Nikkei 225 stock index, which at one stage was trading over 2 percent lower, as well as piling the pressure on the yen, as investors priced in the prospect of more money floating around the Japanese economy.

The Nikkei ended 2.2 percent higher to close at 12,634.54 while the dollar was trading 2.8 percent higher against the Japanese yen, at 95.50 yen.

The developments in Japan helped support markets elsewhere.

Germany's DAX rose 0.5 percent to 7,911 while the CAC-40 in France was 0.9 percent higher at 3,788, with trading little affected by the news that the ECB was keeping its main interest rate unchanged at the record low of 0.75 percent.

However, Britain's FTSE 100 fell 0.3 percent to 6,400 as some traders were disappointed that the Bank of England didn't opt to pump more money into the economy.

The focus in Europe will now center on what ECB president Mario Draghi says in his ensuing press conference, especially when it comes to the recent crisis in Cyprus. Ahead of his remarks, the euro was down 0.3 percent at $1.2814.

"Draghi could still bolster confidence slightly by hinting at future unconventional policy support," said Jennifer McKeown, senior European economist at Capital Economics.

Wall Street appeared headed for a higher open following a disappointing session on Wednesday, when traders were spooked by some soft U.S. economic figures. Dow futures were up 0.4 percent and the broader S&P 500 futures trading 0.5 percent higher.

Traders in the U.S. will on Friday turn their attention to the nonfarm payrolls figures for March, a data series that often sets the market tone for a week or two after their release.

The advance in Tokyo's stock market didn't ripple around Asia. South Korea's Kospi dropped 1.2 percent to 1,959.45 as bellicose rhetoric between North Korea and the U.S. rattled the local market. Early Thursday, North Korea warned that its military has been cleared to attack the U.S. though experts say the North has not demonstrated that it has missiles capable of long range or accuracy. Washington said it was working to defuse the situation.

Australia's resource-heavy S&P/ASX 200 lost 0.9 percent to 4,913.50, hurt by drops in commodities prices. Hong Kong and mainland Chinese markets were closed for a public holiday.

Oil prices were flat, with the benchmark New York rate up 7 cents at $96.52 a barrel.