Nikkei soars on BOJ, Asia shares drop before U.S. payrolls

By Chikako Mogi

TOKYO (Reuters) - Japanese equities soared and the yen hit a 3-1/2-year low against the dollar on Friday after the Bank of Japan's unprecedented monetary expansion, but Asian shares eased ahead of U.S. jobs data amid rising concern over the American economy.

The U.S. nonfarm payrolls data due later in the session will likely show employers added 200,000 jobs last month after hiring 236,000 workers in February. The unemployment rate is seen steady at a four-year low of 7.7 percent.

But Thursday's report showing the number of Americans filing new claims for unemployment benefits hit a four-month high last week, raising the risk of a weaker reading on the payrolls data.

"Given that the U.S. jobless claims data underwhelmed, there is concern the non-farm payrolls will follow suit, and add to the recent run of bearish signals," William Leys, a sales trader at CMC Markets, said in a report.

The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> fell 0.8 percent, dragged lower by a 1.3 percent drop in South Korean shares <.ks11> to a two-month low, by far the worst regional performer.

Japan's Nikkei stock average <.n225> was again the outperformer, extending gains sharply to jump more than 4 percent soon after trading started, topping the 13,000 level for the first time since August 2008. <.t/>

"Japanese stocks will likely continue outperforming global peers as already high appetite from both foreigners and domestic investors has been boosted," said Yoshiyuki Kondo, an analyst at Daiwa Securities.

New Governor Haruhiko Kuroda committed the BOJ to open-ended asset buying and said the monetary base would nearly double to 270 trillion yen ($2.8 trillion) by the end of 2014 in a shock therapy to end two decades of stagnation.

"It means that the BOJ is deathly serious about their plans to reflate the economy," said Neal Gilbert, market strategist at GFT Forex, in a note to clients.

The dollar hit a fresh 3-1/2-year high of 97.06 yen on Friday, while the euro rose to 125.50 yen, extending Thursday's sharp gains. The U.S. dollar and euro soared over 3 percent against the yen on Thursday in their biggest one-day moves since 2008.

YEN SEEN STAYING WEAK, EVEN IF GREENBACK SLIPS

With the BOJ announcing the world's most intense burst of monetary stimulus, some worry that Asian exporting countries that compete with Japan such as South Korea, Taiwan or China may lose their competitiveness as their currencies strengthen against the yen relative to others.

Friday's sharp losses in South Korean shares were due to foreign selling, with investors wary about prolonged tensions on the Korean peninsula and further weakness in the Japanese yen.

The yen's decline comes after years of a yen strength during which Tokyo lost its competitive edge against other Asian exporters, throwing the economy into deep deflation and slump.

Some economists say as long as interest rates remain near zero in both Japan and the United States under strong monetary easing by both central banks, fund flows were unlikely to accelerate out of Japan as a result of the latest BOJ action.

"Despite ample funding in Japan as a result of the BOJ, incentives for yen carry trades are low. For borrowers looking for cheap funding, the dollar offers the best option. U.S. interest rates are similarly near zero as in Japan but dollar liquidity is far bigger to keep funding costs low," said Junichi Makino, chief economist at SMBC Nikko Securities in Tokyo.

Traders and analysts expect the yen to remain weak even if the U.S. dollar comes under pressure from signs of slowing growth. Risk assets were also seen supported by continued monetary stimulus from the world's major central banks.

The dollar index <.dxy> measured against a basket of major currencies hit an eight-month high on Thursday.

The European Central Bank kept interest rates steady at its meeting on Thursday, as expected, sending European shares down sharply. Traders were unhappy at the lack of fresh economic stimulus measures from the ECB and took profits on recent outperformers.

But ECB President Mario Draghi said the bank stood "ready to act" because there was no certainty that the euro zone economy would pick up, leaving the door open for future rate cuts.

The euro was steady against the dollar at $1.2932.

Concerns about the U.S. economy sent the benchmark 10-year U.S. Treasury yield down to near 3-1/2-month lows on Thursday, while the Japan's 10-year yield tumbled to a record low below 0.4 percent and 10-year Japanese government bond futures scaled a new historic high early on Friday.

U.S. crude inched up 0.1 percent to $93.35 a barrel while Brent inched up 0.2 percent to $106.50.

(Additional reporting by Thuy Ong in Sydney Ayai Tomisawa in Tokyo; Editing by Eric Meijer)

Source: http://news.yahoo.com/asia-shares-slip-boj-news-u-payrolls-focus-002147051--finance.html

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