TOKYO – Stocks soared Tuesday one day after hitting a near 17-year-low as Japan's central bank decided to pump more cash into the banking system to try to revive the country's slumping economy. The dollar rose against the Japanese yen.
The benchmark 225-issue Nikkei Stock Average jumped 440.39 points, or 3.84 percent, to finish at 11,917.95. On Monday, the index fell 257.50 points, or 2.19 percent, to 11,477.56.
Monday's close was the lowest since the index ended at 11,439.87 on Dec. 24, 1984, and below this year's previous low finish of 11,579.27 on July 30.
The dollar was trading at 123.02 yen on the Tokyo foreign exchange market at 3 p.m. (2 a.m. EDT) Tuesday, up 1.16 yen from late Monday in Tokyo and above its level of 122.48 yen late Monday in New York.
On the stock market, shares began rising in the morning session as a rebound in U.S. technology shares encouraged Japanese investors, traders said.
The market then shot up in the afternoon after the Bank of Japan announced it would raise the target for the amount of money commercial banks keep at the central bank from 5 trillion yen ($41 billion) to 6 trillion yen ($49 billion).
Increasing that can increase cash flow in the banking system and in turn ease lending to companies and other businesses - a change that generally helps revive the economy.
The move came as a surprise to investors, who had expected the bank to resist growing pressure from political and business circles to do more to battle the country's worsening economic downturn.
Gains in New York and the Bank of Japan's decision to ease monetary policy compelled players to scoop up bargains in heavyweight tech issues, which had plunged Monday because of pessimism over the country's technology industry.
The tech-heavy Nasdaq composite index in New York gained 25.78 to 1,982.25 on Monday, its first gain in seven sessions. The Dow Jones industrial average fell 0.34 point to close at 10,415.91.
The broader Tokyo Stock Price Index of all issues listed on the first section was up 28.45 points, or 2.44 percent, to end at 1,195.54 on Tuesday. On Monday, it fell 15.40 points, or 1.30 percent.
Japan is entering the 11th year of a no-growth period and massive government spending has done little to revive the economy. The nation's banks are saddled with bad debts, corporate profits are sinking and unemployment has hit a record 4.9 percent.
The administration of Prime Minister Junichiro Koizumi has repeatedly said the government will no longer resort to public works projects to spur economic growth.
In currencies, the dollar also jumped after the Bank of Japan decided to inject more money into the economy.
The euro was traded at 110.36, up from 109.20 yen late Monday in Tokyo.
The yield on the benchmark 10-year Japanese government bond fell to 1.3000 percent. Its price stood at 100.87, up 0.05 point from Monday.