LONDON: Stock markets around the world rebounded Friday, ending a highly volatile month with a bang after the Bank of Japan unexpectedly slashed interest rates into negative territory for the first time.
Equities in Asia, Europe and the United States rallied as traders seized on the BoJ's announcement that it would charge banks to hold their cash, in news that also sent the yen tumbling.
The Bank of Japan's unprecedented decision to adopt a below-zero interest rate mirrors the European Central Bank (ECB) and the Swiss National Bank (SNB) -- which both first unveiled negative rates in 2014.
The policy is the BoJ's latest weapon to spur lending and is part of its long-running fight against anaemic economic growth and deflation.
After the news Tokyo's Nikkei stock index soared and the yen plunged.
- 'Positive end' to January -
"It's been a positive end to what has been a disappointing month for equity markets," said CMC Markets analyst Michael Hewson.
He said "the Bank of Japan caught investors unawares by unexpectedly cutting rates into negative territory for the first time ever, in the process joining the European Central Bank and the Swiss National Bank into the realms of experimental monetary policy."
The -0.1 deposit rate aims to give Japanese banks an incentive to boost lending, which in turn should help fuel economic growth.
Policymakers hope that putting more cash in shoppers' wallets will spur spending and move Japan closer to the bank's 2.0-percent inflation goal.
Lower interest rates tend to be positive for stock markets because they make equities a more attractive asset for investors, while boosting liquidity and hopes of economic growth.
Trading floors across the world have been awash with red in January as investors endured one of the worst starts to a year in recent history, with markets hit by China's bumpy economic slowdown, weak global growth and crashing oil prices.
Some stability seemed to be established over the past week, however, on hopes that the BoJ and ECB would further ramp up their stimulus.
The BoJ also warned Friday over the negative impact of the economic crisis gripping key trading partner China -- a crucial driver of global growth -- and said it was prepared to cut rates further below -0.1 percent "as necessary".
- 'Twitchy' over economy, deflation -
"The Bank of Japan's move shows how twitchy policy makers are getting about faltering global growth and the potential for deflationary pressures to get out of control," said analyst Laith Khalaf at stockbroker Hargreaves Lansdown.
"There's nothing like a bit of loose monetary policy to get stock markets excited, and true to form, global indices have reacted positively to the news."
Japan's Nikkei stock index soared more than three percent at one point, before ending 2.8 percent higher.
Elsewhere in Asia, Hong Kong soared 2.5 percent and Shanghai surged 3.7 percent.
In Europe, both London and Paris closed with gains above 2 percent.
Wall Street also pushed higher Friday despite data showing the US economy slowed sharply in the fourth quarter of last year to a 0.7 percent annual rate, down from 2.0 percent in the third quarter.
The Dow Jones Industrial Average was up 1.2 percent in midday trade.
But the BoJ's move "is really a tacit admission that the outlook stinks," said Briefing.com analyst Patrick O'Hare.
And it is the poor outlook that led markets worldwide enduring a brutal start to 2016, despite Friday's rebound.
Shanghai's benchmark index ended January as the world's worst performer, plunging 23 percent.
In Europe, Milan ended the month down nearly 13 percent, while Frankfurt fell almost 9 percent. Despite a large number of commodities and energy companies that have relied on China for growth in recent years, London's FTSE 100 limited losses to less than 3 percent.
US markets are in line to end January with considerable losses, with the Dow down over 6 percent for the month, and the tech-heavy NASDAQ Composite around 9 percent lower.
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