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Yen sinks, Nikkei surges on big Japanese stimulus

Pan Pylas, AP Business Writer

A man looks at the latest Nikkei stock index on display in an electric signboard of a securities firm in Tokyo Thursday, April 4, 2013. Weak economic reports on hiring and service industry growth in the U.S. sent Asian stock markets lower Thursday. (AP Photo/Koji Sasahara)

LONDON (AP) -- Japanese stocks outperformed all others for the second day running Thursday after the country's central bank announced a bold new approach to fixing the economy.

Elsewhere, stock markets in Europe and the U.S. struggled amid nervousness over U.S. jobs data on Friday, while the euro fell on expectations the European Central Bank may be getting closer to lowering borrowing costs.

However, the spotlight has remained on the Bank of Japan's announcement to expand the money supply massively to stoke inflation and get the economy out of its two-decade stagnation.

At the end of a two-day meeting, the Japanese central bank, under new Governor Haruhiko Kuroda, said it would double the money supply through the purchase of government bonds and other measures. Kuroda has vowed to do whatever necessary to get Japan 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 2.9 percent higher against the Japanese yen, at 95.63 yen.

The developments in Japan did little to support markets elsewhere in the run-up to Friday's U.S. nonfarm payrolls figures for March, a data series that often sets the market tone for a week or two after their release. Soft weekly jobless claims raised the prospect that they may disappoint and that accentuated the negative tone.

In Europe, Germany's DAX fell 0.1 percent to 7,864 while the CAC-40 in France was 0.2 percent lower at 3,746. Trading was little affected by the news that the ECB was keeping its main interest rate unchanged at the record low of 0.75 percent.

What did attract investors' interest, at least in the currency markets, was an ensuing statement from ECB President Mario Draghi that the rate-setters were "closely" monitoring economic developments and their impact on inflation.

"Draghi ... appears to be paving the way for resumption of lower interest rates," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

That view caused the euro to fall — it was trading 0.5 percent lower at $1.2788 but had traded as low as $1.2755 in the immediate aftermath of Draghi's remarks.

Elsewhere in Europe, Britain's FTSE 100 fell 0.7 percent to 6,371 as some traders were disappointed that the Bank of England didn't opt to pump more money into the economy.

Wall Street was subdued following a disappointing session on Wednesday, when traders were spooked by some soft U.S. economic figures. The Dow Jones industrial average was up 0.2 percent at 14,573 as was the S&P 500 index at 1,556.

Optimism was dented by the news that weekly jobless claims rose 28,000 to 385,000, in contrast to expectations for a modest decline. The claims figures came ahead of Friday's nonfarm payrolls figures for March.

Earlier, 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.

Hong Kong and mainland Chinese markets were closed for a public holiday.

Oil prices tracked equities lower, with the benchmark New York rate down $1.30 at $93.11 a barrel.