Asian shares rebounded in choppy trade and the yen fell on Wednesday after the Bank of Japan eased monetary policy further, following the U.S. Federal Reserve's aggressive stimulus and raising speculation of more big central bank efforts to support growth.
But concerns remained about fiscal strains in Spain and deteriorating corporate profits, keeping gains in broader markets subdued compared with the rally inspired by the Fed launching a third round of quantitative easing last week.
European equities were seen rising, and a 0.4 percent rise in U.S. stock futures suggested a firm Wall Street open as well. Financial spreadbetters called London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open as much as 0.8 percent higher.
The BOJ once again boosted its asset purchase and loan programme, a move seen aimed at bolstering Japanese shares and weakening the yen to help underpin the country's fragile export-reliant economy - already hit by slowing global demand, with potential downside risks added by heightening tensions with China, its significant trading partner.
The BOJ move follows the Fed's QE3 easing and the European Central Bank adopting earlier this month a bond-buying scheme to cut borrowing costs in euro zone countries seeking assistance.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> gained 0.7 percent after trading flat to down as much as 0.2 percent earlier in the session, with Hong Kong <.HSI> shares outpacing others with a 1.3 percent gain to a 4-1/2 month high.
"With the European Central Bank, the U.S Federal Reserve and now the Bank of Japan - the world's major central banks - moving to ease, there will now be expectations for the PBOC (People's Bank of China) to follow suit," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
The yen slipped to a one-month low around 79.20 and the Nikkei stock average <.N225> jumped 1.6 percent to a 4-1/2 month high.
"The BOJ had to move after the Fed and the ECB took action, and market reactions reflect such sentiment," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, adding that if the dollar breaks above a technical level of 79.30 yen, it has further scope to gain against the yen.
"There is also more upside to the cross-yen as risk sentiment remains supported by these actions, even if the euro and the Australian dollar are also top-heavy given the European problems and weak Chinese growth," he said.
Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, said the BOJ was probably mindful of underpinning Japanese share prices and preventing the yen's appreciation as Japanese companies head for the fiscal half-year book closing on September 30.
Commodities regained ground in choppy trade, with London copper up 0.6 percent to $8,370 a tonne and oil futures reacting positively to the BOJ, with U.S. crude up 0.7 percent to $95.91 a barrel and Brent crude adding 0.4 percent to $112.48.
Spot gold erased earlier losses to rise 0.3 percent to $1,776 an ounce, just a tad below its highest since February 29 hit on Friday.
LIQUIDITY AMPLIFIES SWINGS
The BOJ acted just as riskier assets such as equities, which spiked after the Fed's move, have consolidated with investors now contemplating whether global central bank stimulus efforts can revive demand.
A Thomson Reuters/INSEAD survey on Wednesday underscored such concerns, showing business sentiment among Asia's top companies fell for a second straight quarter, dragged down by export-orientated economies such as China and Japan, while domestic spending helped boost Southeast Asia's outlook.
The euro zone debt crisis continues to undermine sentiment as Spain kept skirting around a decision on whether to seek a European Union bailout, which is conditional for the ECB to start buying the country's bonds to tame its borrowing costs.
The euro was up 0.2 percent to $1.3070.
Markets were now focusing on the Spanish problem and the weakness in the U.S. economy, said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.
"I doubt those questions are going to get answered any time soon, so maybe a one-off repricing as a result of the ECB and Fed action, and then beyond that, we are back at the whims of going up and down 1 to 2 percent a day," Foster said, adding that the liquidity pumped in by central banks amplifies market swings as it remains in the financial system rather than trickling into the real economy.
Asian credit markets were a touch softer, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 2 basis points but still near a 14-month low.
