Tokyo shares rallied nearly six percent Friday, tracking strong gains in US and European markets as hopes for fresh European and Japanese central bank stimulus cheered investors. The benchmark Nikkei 225 index at the Tokyo Stock Exchange soared 5.88 percent, or 941.27 points, to 16,958.53, while the broader Topix index of all first-section shares also gained 5.59 percent, or 72.70 points, to 1,374.19.
After suffering a series of heavy losses since the start of the year, global investors were cheered by a pledge from the head of the European Central Bank that he was ready to further ease monetary policy. That was followed by a report in the respected Nikkei business daily that the Bank of Japan was also considering plans for more economy-boosting measures as consumer prices are hammered by crashing oil prices.
"With further hopes for policy co-ordination among the central banks, the market will be supported," Nomura Holdings senior strategist Juichi Wako told Bloomberg News. "Things will still be volatile, but we'll generally be rising." The rebound came as analysts said they expected the bluechip Nikkei to bounce back after diving into bear territory this week - marked by a decline of more than 20 percent from highs in June. Overnight, the ECB kept interest rates unchanged, but bank chief Mario Draghi highlighted worries about weak inflation in pledging to reconsider monetary stimulus levels in March.
"We have the power, willingness and determination to act," Draghi told a news conference. "There are no limits how far we are willing to deploy our policy instruments." Sentiment improved also following a 4.2 percent rise in US oil prices to $29.53 a barrel, a move partly seen as a technical bounce following Wednesday's sharp decline to a 12-year low.
US stocks advanced, with the S&P 500 climbing 0.5 percent behind strong gains in petroleum shares. Meanwhile, the Bank of Japan's policymaking board, which will meet next week, is reportedly mulling whether to offer additional easing measures to address risks to the economy under a stronger yen, declining shares and falling oil prices.
The central bank might consider expanding its 80 trillion yen ($654 billion) annual asset-buying scheme, according to the Nikkei newspaper. "The cavalry might be coming to the rescue in terms of the central banks starting to sound more dovish," Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, told Bloomberg TV. "There's a little bit of light at the end of the tunnel. We've probably seen the worst and by the end of the year things will be a lot brighter than they are now."
Among major gainers at the Tokyo bourse, Toyota soared 6.73 percent to 6,822, while Sony jumped 4.03 percent. Market heavyweight Uniqlo-operator Fast Retailing roared 8.12 percent to 37,420. Mega bank Mitsubishi UFJ Financial Group rose 4.99 percent to 624.7.
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