Tokyo: Japanese shares led Asian markets higher, climbing 4.9% after Tokyo launched a $16.7 billion scheme on Tuesday to help firms threatened by the financial crisis.
Japan’s funding plan helped the Nikkei average to its biggest one-day gain in percentage terms since mid-December, along with a fall in the yen and a 9 percent surge in shares of Honda Motor Co. The carmaker announced further production cuts in North America and Japan, but a newspaper reported it would boost capacity in China.
Japan’s trade ministry said capital would be provided only while companies faced difficulty in fund-raising due to market turmoil, and firms receiving the funds would be required to draw up plans to boost profitability within three years.
“This news will be positive, since it’s directed at firms in general and raises hopes that this will help with fund-raising, but the yen’s fall has helped too,” said Yutaka Miura, senior technical analyst at Shinko Securities.
The MSCI index of Asia-Pacific stocks outside Japan was up 1.5% at 3:45pm after a 0.48% gain in the Dow Jones industrial average and a 0.56% rise in the Standard & Poor’s 500 index on Monday.
Many Asian markets were closed for Lunar New Year, but Australian shares closed up 3% after a one-day holiday, helped by miners such as Rio Tinto, which were buoyed by a rebound in metal prices.
Indian shares provisionally rose 3.8%, as gains in global markets triggered short covering ahead of the expiry of monthly derivatives.
Shares in Europe struggled but were supported by a rise in the Ifo institute’s gauge of German business confidence.
The pan-European FTSEurofirst 300 index was flat. Overall, MSCI’s main world stock index gained 1.2%.
Yen steps back
News of the funding plan helped push the yen down against the dollar and deepen its losses against the euro and sterling as shares gained and investor risk tolerance appeared to pick up.
The yen has tended to fall against higher yielding currencies as investor risk appetite improves and the currency had slipped on Monday after a rise in US existing home sales and British bank Barclays said it was not seeking fresh capital.
The euro was up 0.8% at ¥118.32 yen in Asian trade, well above last week’s seven-year low of ¥112.08, while sterling, which hit a record low last week, climbed 1 percent to ¥125.68. The dollar gained 0.4% to ¥89.46.
US Treasuries edged down in Asia as shares rallied, sapping demand for safe haven debt, and the bond market was in wait-and-see mood ahead of a two-day Federal Open Market Committee meeting which ends on Wednesday.
The Fed is expected to leave the target range for the benchmark overnight federal funds rate unchanged at zero to 0.25% and to flesh out new ways to free up lending.
The benchmark 10-year note fell 2/32 in price to yield 2.653%, up about 0.5 basis point from late US trade.
Japanese government bond futures dropped, tracking falls in Treasuries and euro zone government bonds and dented by the rebound in stocks from a three-month closing low on Monday.
Analysts warned investor sentiment could turn quickly, with layoffs continuing and European and US corporations disclosing plans to cut more than 70,000 jobs to cope with the downturn.
Gold held steady in Asia just above $900 an ounce after a three-day rally on safe-haven buying but dropped to back below $893 in Europe.
Oil prices rose more than 1%, reversing losses as traders focused on short-term factors, such as cold US weather and an Australian cyclone. USlight, sweet crude for March delivery climbed back above $46 a barrel.