By MYRA P. SAEFONG, MATTHEW ALLEN AND PHILIP VAHN
Exporter shares in Japan were among the big winners in Asia Tuesday, when the yen fell before Japan's central bank unveiled further steps to ease monetary policy at an unscheduled meeting.
The nation's central bank announced, after trading in Japan closed, that it would introduce a new funds-supplying operation to encourage a further decline in longer-term interest rates. The move was aimed at keeping the country's fragile economic recovery, in light of deflationary pressures and a soaring currency. But many analysts said the program was essentially a rehash of a previous, similar facility to lend at the 0.1% policy rate. Compared with market expectations, the BOJ's move was "relatively weak," said Christian Carrillo, senior interest rate strategist at Societe Generale.
Ahead of the announcement, Japan's Nikkei 225 closed up 2.4% with Australia's S&P/ASX 200 up 0.4% and South Korea's Kospi Composite ending 0.9% higher. Hong Kong's Hang Seng Index gained 1.3% while the Shanghai Composite also rose 1.3% and Taiwan's main index rose 0.9%.
A Tokyo money dealer reacted as the U.S. dollar is traded at 87.43 yen on the Tokyo foreign exchange in Tokyo, on Tuesday.
Singapore's Straits Times Index climbed 1.4% and Mumbai's Sensex finished up 1.6%.
At a special meeting Tuesday, the Bank of Japan kept its overnight call rate target unchanged at 0.1% but also set up a new 10 trillion yen ($120 billion) lending facility, which will accept as collateral Japanese government bonds, corporate bonds, commercial paper and deeds on loans.
The U.S. dollar gave back some of the earlier gains against the Japanese yen it saw in the run up to the meeting, to trade in the upper 86 yen range after the central bank announced its additional easing steps.
Exporters, which had declined early on in the trading session, climbed when the yen slid, with Sony closing up 1.9%, Canon up 2.1% and Toyota Motor 2.3% higher in Tokyo.
"Japan's situation remains serious," said Richard Hastings, a consumer strategist at Global Hunter Securities. Should the yen continue to strengthen against the U.S. dollar, "then we are looking at a deeply-rooted reshaping of the Japanese economy, with far-reaching implications for its relationship to China and to the United States."
In other foreign exchange markets the euro was up against the U.S. dollar at $1.5048 from $1.5015 late Monday in New York, and was at 130.86 yen from 129.80 yen.
"While global markets seem to have moved past the likelihood of catastrophic losses causing any sort of systemic meltdown, the 'Dubai debt crisis' may yet have a less obvious, but longer-lasting impact on investors psychology," said Ben Potter, a research analyst at IG Markets, in a note to clients.
Banks in Japan closed higher, in tune with gains in Tokyo. Mitsubishi UFJ Financial Group closed up 3.1% in heavy volume after saying Monday that it will raise up to 1.056 trillion yen ($12.24 billion) by issuing new shares, including an over-allotment option, in what would be the biggest-ever share sale by a Japanese financial institution. Japan's largest bank by assets and market capitalization had already announced a plan to raise up to one trillion yen by issuing common shares earlier last month.
In China, Zijin Mining Group jumped 6.5% after the gold producer said it has signed agreement with Indophil Resources NL to take over the Melbourne-based company for 545 million Australian dollars (US$498 million). "This will give [Zijin] larger access to gold resources in south east Asia," said Essence Securities chief analyst Heng Kun.
Australian shares managed to hold up even after the Reserve Bank of Australia raised its cash rate target by one-quarter of a percentage point to 3.75%, taking back more of its emergency cuts as the economy headed towards recovery in 2010.
"Had markets seen a December rate hike [a] less than even chance, the RBA probably would have held steady, particularly as the need for a third-consecutive hike was highly debatable," said Mr. Potter. "Market expectation, no doubt, afforded the RBA the luxury of making such a marginal call."
Macquarie Economist Brian Redican said "it's very much steady as she goes" for the RBA, with another quarter-point increase likely in February. "Everyone knows rates have got to go up over the next twelve months, and really it's going to be a month by month decision," he said.
National Australia Bank finished down 0.2% and Rio Tinto fell 0.4%, while Westpac Banking rose 0.2% and BHP Billiton added 0.1% in Sydney. However, gains in Telstra, up 0.9%, and Newcrest Mining, up 1.7%, continued to support the overall market.
South Korea's banks continued their recovery from Friday's sharp falls. KB Financial closed up 1.7% and Shinhan Financial was 0.9% higher.
Japanese government bond futures pulled back from a 20-month high after the BOJ stopped short of deciding to increase its buying of long-term JGBs. Lead December 10-year JGB futures fell as low as 140.03 in evening session trading, while the yield on the 5-year Japanese government bond fell below 0.5% for the first time since September 2005.
Spot gold climbed to $1,187.10 per troy ounce, up $8.20 from the New York close. January crude oil futures were up 15 cents at $77.43 per barrel on Globex.
Write to Matthew Allen at matthew.allen@dowjones.com
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