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Japan stock index soars 5 percent, yen falls after BOJ announces new stimulus

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SEOUL, South Korea — Japan's stock index surged 5 percent to the highest level since late 2007 and the yen slid against the dollar Friday after the Bank of Japan unexpectedly announced new stimulus to boost a flagging economic recovery.

Other Asian stock markets were also higher after the Japanese central bank's announcement. The dollar rose 1.8 percent to 111.16 yen, which was the Japanese currency's lowest level in more than five years.

The bank said it would increase its asset purchases by between 10 trillion yen and 20 trillion yen ($90.7 billion to $181.3 billion) to about 80 trillion yen ($725 billion) annually.

The Nikkei also got a boost from expectations the government pension fund will increase its holdings of shares. The Nikkei newspaper reported that Japan's health minister is set to announce holdings of domestic and foreign stocks will be raised to 25 percent each, far above market's expectations.

Tokyo's Nikkei 225 was up 4.8 percent at 16,413.76 after shedding some of its initial gains. Hong Kong's Hang Seng rose 1.1 percent and Seoul's Kospi was up 0.3 percent. Australia's S&P/ASX 200 rose 0.9 percent to 5,516.90. Stocks in mainland China, India and Southeast Asia also rose.

The Bank of Japan's stimulus announcement came after economic data released in the morning showed that Japan's economy remained in the doldrums following a sales tax hike in April. Japan's inflation slipped and household spending fell in September while unemployment ticked up. Core inflation was at 3 percent, down from 3.1 percent in August while unemployment rose to 3.6 percent from 3.5 percent.

PHOTO: A man walks past an electronic stock board of a securities firm in Tokyo, Friday, Oct. 31, 2014. Japan's Nikkei 225 stock average surged 5 percent and the yen slid against the dollar after the Bank of Japan unexpectedly announced new stimulus to boost a flagging economic recovery. (AP Photo/Eugene Hoshiko)
A man walks past an electronic stock board of a securities firm in Tokyo, Friday, Oct. 31, 2014. Japan's Nikkei 225 stock average surged 5 percent and the yen slid against the dollar after the Bank of Japan unexpectedly announced new stimulus to boost a flagging economic recovery. (AP Photo/Eugene Hoshiko)

Investors in Asia also took cues from overnight gains on Wall Street, which was helped by a strong growth figure from the U.S. and upbeat earnings reports by companies such as Visa.

The U.S. economy expanded 3.5 percent in the July-September quarter from a year earlier, driven by solid gains in business investment, export sales and the biggest jump in military spending in five years. The figure was slightly above what economists expected. The world's largest economy continued its recovery from the previous quarter, when it expanded 4.6 percent.

The growth figures were released after the Federal Reserve confirmed the end of its $4 trillion bond-buying program because the U.S. economy no longer needs as much assistance. It also signaled that an eventual interest rate hike is on the cards

"It was good enough to remind investors that the early stages of rate increase cycles are usually good times for stock markets," Ric Spooner, chief market analyst at CMC Markets, said in a commentary. "As recent data releases have indicated, central banks begin to think about rate increase when growth is strong and corporate earnings are doing well."

The Standard & Poor's 500 gained 0.6 percent to close at 1,994.65 on Thursday. The Nasdaq composite rose 0.4 percent to 4,566.14. The Dow Jones industrial average surged 221.11 points, or 1.3 percent, to 17,195.42.

Benchmark U.S. oil snapped a losing streak, adding 4 cents to $81.16 in electronic trading on the New York Mercantile Exchange. The contract dropped $1.08 to settle at $81.12 on Thursday. Brent crude, used to price oil in international markets, dipped 1 cent to $86.23 in London

In currencies, the euro fell to $1.2559 from $1.2607 late Thursday.

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