Tokyo stocks closed sharply higher Friday, with the Nikkei index surging 3 percent at one point before losing some ground, after the Bank of Japan (BOJ) announced it would introduce negative interest rates.
The 225-issue Nikkei Stock Average gained 476.85 points, or 2.80 percent, from Thursday to end the day at 17,518.30.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, ended 39.97 points, or 2.87 percent, higher, to close the week at 1,432.07.
Local analysts said that the BOJ surprised markets here by saying it plans to introduce a negative interest rate from Feb. 16, as falling oil prices have hampered the bank's reflationary efforts, with the shock move aimed at proactively defending against global economic malaise denting business sentiment here.
The central bank announced that it plans to achieve its inflation target "at the earliest possible time," amid turbulent oil prices and a slowdown in the global economy, and voted to apply a negative interest rate of minus 0.1 percent to current accounts held by financial institutions, in a narrow 5-4 vote by its policy board members on Friday.
The bank's decision follows a raft of economic data released by the government on Friday morning that missed market expectations, sparking concerns for the outlook of the world's third-largest economy.
A decline in factory output and household spending, as well as consumer prices in Dec. edging up only 0.1 percent, while CPI for 2015 remained largely flat, painted a glum outlook for the domestic economy, the data set from the government showed early Friday.
But despite the bank's intentions behind pumping new money into markets, some local analysts voiced concern Friday that an ongoing stock market rout in Tokyo that could now be caused by investors switching out of riskier assets like stocks and into safe havens like the yen, should a currency war occur following the yen's forced retreat, would push its price back up and discourage firms from increasing capital expenditure, in spite of the banks ultra-accommodative policy.
All industry categories, except banking, on the main section closed in positive territory on the last trading day of the week.
Notable gainers comprised real estate, securities and mining-linked shares. The day's turnover was 4,431.7 billion yen (36.89 billion U.S. dollars).