Tokyo: Japan said it plans to spend at least $100 billion more to help its economy through the global crisis, as investors seized on signs that markets may have bottomed to buy stocks and commodities.
Japan, grappling with its worst recession since World War II, will unveil a new economic stimulus package on Friday including spending of at least 2% of its gross domestic product, Finance Minister Kaoru Yosano said.
United Nations Secretary-General Ban Ki-moon called for at least $300 billion of the $1.1 trillion stimulus package agreed by G-20 leaders last week to be allocated to helping developing countries.
He also urged the G-20 to turn summit pledges into “concrete action”, adding that the package agreed would help the world economy overcome the financial crisis.
Japan’s Nikkei rose 1.2%, while MSCI’s measure of stocks elsewhere in the Asia-Pacific rose 2% as investors bet the global economy is nearing a bottom.
European shares also traded higher, with the pan-European FTSEurofirst 300 index of top shares gaining 1.3% by 2:38pm.
Increased appetite for risk saw the yen fall against a basket of currencies, hitting its lowest level against the dollar in almost six months.
Analysts pointed to signs of a re-emergence of the pre-crisis strategy of carry trades, involving speculators selling the low-yielding Japanese currency in favour of higher-yielding and riskier assets.
Heartened investors also piled into equities via the $19 billion rights issue of HSBC, Europe’s largest bank. HSBC said on Sunday it had sold 4.89 billion shares with existing shareholders and expected to sell the rest on Monday.
“With the G-20 summit last week, and obviously some massive stimulus packages, there’s some good news here and there, mixed with some bad news,” said James Foulsham, head of trading at CMC Markets in Sydney.
The head of the IMF, Dominique Strauss-Kahn, called for China to strengthen domestic demand, telling a French newspaper on Sunday the yuan was undervalued.
The Financial Times published details of a confidential report recommending that struggling European Union countries in central and eastern Europe should switch to the euro even without full eurozone membership.
The paper said the report supported a region-wide anti-crisis strategy by the International Monetary Fund, World Bank and European Bank for Reconstruction and Development.
In Berlin, the Sentix research group said sentiment among euro zone investors improved more than expected in April to its strongest level since January as the monthly index of investor morale rose to -35.3 from -42.7 in March.
Even Friday’s dire US jobs data, which showed unemployment soared to 8.5%, failed to dent the rally as markets found comfort in the fact that the numbers came in around forecasts.
US crude oil futures on Monday gained more than $1 from the previous close.
Slashing interest rates and pouring money into the financial system may yet create problems with inflation down the line, but central banks remain focused on rebuilding access to credit to get trade and lending flowing again.
The Reserve Bank of Australia is likely to cut interest rates again as early as this week, analysts said, after data showed job advertisements slid for the 11th month running in March.
A private measure of inflation also showed an easing of price pressures, adding to the case for another cut.
The European Central Bank, which cut rates to 1.25% last week, also still has room to move on interest rates and liquidity measures, ECB Executive Board Member Gertrude Tumpel-Gugerell said on Sunday.
The ECB has been focusing on improving the flow of funds to banks as a key part of its strategy to revive the economy.
On Monday, the Bank of Japan began a two-day meeting to review interest rates but, with rates already at 0.10%, it is seen deferring any attempt to ease pressure on companies until later this quarter.
Along with cutting interest rates and increasing spending to stimulate economies, greater financial regulation has been a third major plank for policymakers seeking to rebuild confidence in the global economy.
Mario Draghi, head of the Financial Stability Board, said in an interview the most urgent need was to restore confidence in the solidity of the financial system.
US Treasury Secretary Timothy Geithner said the US government would not hesitate to oust management of big banks that require “exceptional assistance”.