Asian shares jumped on Friday and the yen swooned after the Bank of Japan stunned markets by adopting negative interest rates in its boldest step yet to reinflate the long-languishing economy.

 

The yen fell across the board and sovereign bonds rallied after Japan's central bank said it would charge 0.1 per cent for excess reserves parked with the institution, an aggressive policy pioneered by the European Central Bank.

 

It also said rates could go even more negative if needed to ensure inflation gravitated to its long-held, and often missed, target of two per cent.

 

The move came as a major surprise to investors, who had thought policy makers too cautious to ever adopt such radical measures. The reaction was immediate with the dollar surging over two yen to 121.14.

 

The dollar was up 0.44 per cent against a basket of currencies, while the euro eased back to $1.0911 .

 

Japan's Nikkei share index extended early gains to rise 3.4 per cent, and lifted bourses across the region. MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.3 per cent.

 

The Shanghai benchmark rose two per cent, attempting to bounce from steep losses early in the week.

 

The buying spread to US debt markets as investors wagered the BOJ decision would make it even harder for the Federal Reserve to hike rates four times this year, as originally envisioned by its policy board.

 

Fed fund futures rose to imply a rate of 51 basis points by year end, compared to 90 basis points a month ago. Futures for US 10-year bonds rose five ticks.

 

The promise of extra global stimulus gave an added fillip to oil, which had already risen for three sessions on talk of a possible deal to pare back excess supply.

 

US crude was up a further 35 cents at $33.55 per barrel, while Brent futures firmed 36 cents to $34.25.

 

The semblance of stability in oil combined with some solid company results to lift Wall Street. The Dow gained 0.79 per cent, while the S&P 500 added 0.55 per cent and the Nasdaq Composite 0.86 per cent.

 

Facebook surged 15.5 per cent in its biggest one-day leap since 2013 after smashing expectations, while Alphabet climbed 4.28 per cent.

 

Microsoft rose 4.5 per cent in late trading after beating forecasts, but Amazon slumped 12 per cent as profits missed analysts' estimates by a wide margin. - Reuters