Tokyo shares roared back to life Wednesday, soaring more than four percent on upbeat US data and China's fresh stimulus, which bolstered hopes for the world economy. The Japanese market got off to a strong start after Wall Street rallied Tuesday as reports on the US manufacturing sector, construction spending and auto sales showed the world's top economy remains resilient even as global growth sputters.
Japanese shares have been hammered since the start of the year, with Tokyo's two key indices down about 12 percent, as a rout on world equity markets hit one of the world's biggest stock markets.
But the Nikkei 225 index jumped 4.11 percent, or 661.04 points, to close at 16,746.55 on Wednesday. The broader Topix index of all first-section shares surged 3.75 percent, or 48.78 points, to 1,349.61.
"The US economy isn't as bad as we had expected," Takahisa Odaka, an equity market strategist at Nomura Holdings in Tokyo, told Bloomberg News.
"It'll take time to heal the wound in Japanese shares but the bottom is getting firmer.
"If US economic data gets stronger and investors become more confident the global economy isn't slowing, we could see some buying back of shares."
Japanese exporters got a big boost Wednesday as the yen slid from levels seen earlier this week - a plus for the profitability of firms doing business overseas.
Tokyo's rise came after Japan on Tuesday for the first time sold a new 10-year bond with a yield below zero at a government sale, effectively meaning investors pay the government to lend it money.
The average yield on the bond - its annual return if held to maturity - was minus 0.024 per cent.
Tuesday's sale came after Japan's central bank in January shocked markets by unveiling a below-zero interest rate policy as its latest weapon to spur bank lending and drive up inflation.
However, the move was widely panned as desperate, and underscored the challenges facing Prime Minister Shinzo Abe's limping bid to kick-start Japan's economy.
On forex markets the dollar was nearly flat at 113.95 yen in mid-afternoon trade from 113.94 yen late Tuesday in New York, but well up from 112.72 yen earlier Tuesday in Tokyo.
Market sentiment also improved after the People's Bank of China late Monday announced it was cutting its reserve requirement for banks.
The move is aimed at encouraging lending and stimulating activity in the world's number-two economy, a key driver of global growth.
In Tokyo trading Uniqlo operator Fast Retailing, a market heavyweight, soared 6.45 percent to finish at 33,330 yen, while mobile carrier SoftBank was up 1.90 percent to 5,728 yen.
Automaker Toyota surged 3.46 percent to 6,097 yen and Sony soared 5.23 percent to 2,491.5 yen.
Despite a dip in oil prices, energy explorer Inpex jumped 3.93 percent to 859.2 yen.