Asian markets climbed after Japan shares took a roller-coaster ride in the immediate aftermath of the Bank of Japan's (BOJ) decision to adopt a negative interest rate policy.
The , which was down 0.6 percent before the announcement, surged as much as 3.51 percent soon after, before tumbling as much as 1 percent. It then surged to close up 2.80 percent, or 476.85 points, at 17,518.30.
After the BOJ move, the yield on the benchmark 10-year Japan government bond (JGB) fell to a record low of 0.11 percent from around 0.22 percent before the decision.
There was no quick agreement on why the market outlook on the move shifted so quickly.
Gavin Parry, managing director at Parry International Trading, suggested that a move to negative deposit rates just after a supplementary increase in Japan's qualitative and quantitative easing (QQE) program could have been read to mean the BOJ was running out of bullets.
In its statement on Friday, the central bank said it would continue with the QQE and negative interest rate policies for "as long as it is necessary for maintaining that target in a stable manner."
Marcel Thieliant, senior Japan economist at Capital Economics thought the overall complexity of the BOJ's move may have spurred the midday selloff.
"What they did announce today will be effective. It will lead to lower rates in the money market. But some people had second thoughts once they read the statement," he said.
He noted that the BOJ had imposed a "three-tier" system on negative rates. With the huge amount of bank reserves currently sitting with the central bank, "if they impose a negative rate on all these balances, it would have a big impact on banks' profitability," he said, noting that existing reserves were going to be exempted, but there was likely confusion about how the amounts subject to negative rates would be increased.
The dollar-yen pair gained advanced after the announcement, trading as high as 121.35, from around 118.50 before the news. The pair trimmed gains to trade around 120.82 after the Japan stock market closed.
Banks in Japan, which will likely see their profit dented by negative rates, sold off, with Mitsubishi UFJ falling 2.81 percent and Mizuho Financial ending down 1.67 percent. But exporters, which benefit from a weaker yen when their overseas earnings are translated into their home currency, rallied. Sony surged 6.10 percent and Nissan added 7.13 percent.
Rest of Asia close up post-BOJ
Across the Korean Strait, the Kospi erased early losses after the BOJ announcement, closing up 5.12 points, or 0.27 percent, at 1,912.06
Chinese markets closed in positive territory, with the gaining 81.98 points, or 3.09 percent, to 2,737.64, while the Shenzhen composite was up 60.36 points, or 3.70 percent, at 1,689.43. Hong Kong's was up 2.11 percent.
Among the biggest gainers on the index were brokerages Orient Securities, up 9.98 percent, and Huatai Securities, gaining 10.04 percent. China Railway Group was also up 9.94 percent.
After a long global rout, some analysts believe equity markets might be reaching a turning point.
In a morning brief, Christophe Donay, head of asset allocation and macro research at Pictet Wealth Management, wrote, "Outside of financial crises, the average length of a correction on equity markets is about 50 days—and taking the correction in December as the start of the current period of volatility, the length of this sell-off is now around the average."
Donay added, "Since we do not believe that conditions point to a financial crisis, the magnitude and length of the sell-off suggest that we may well have reached the bottom, and are set for a rebound."
Australian gold miners take a hit
Down Under, the ASX 200 index finished up 29.33 points, or 0.59 percent, at 5,005.50, after see-sawing between positive and negative territories throughout the trading day. The energy sector was the biggest gainer, up 5.28 percent, while the gold sector lost 5.86 percent.
Australian gold miners were mostly down, with Alacer Gold losing 3.08 percent and shares of Newcrest falling 7.20 percent. traded nearly flat at $1,113.16 an ounce.
Elsewhere, resources stocks were mostly positive, with shares of Rio Tinto and BHP Billiton closing up 0.51 and 1.66 percent respectively. Iron ore producer Fortescue was up 13.16 percent, while Atlas Iron saw retraced earlier losses to close up 6.67 percent.
Energy stocks gain across the board
Energy stocks across the region were mostly higher after oil made overnight gains for the third consecutive day, with both U.S. crude and Brent finishing above the $33-mark. Prices, however, remain at multi-year lows.
Australia's Santos was up 7.48 percent, while Woodside gained 5.99 percent. In Japan, Inpex was up by 5.94 percent, while Japan Petroleum saw gains of 6.26 percent. South Korea's S-Oil was up 1.83 percent.
In Hong Kong, shares of CNOOC gained 8.62 percent, while mainland-listed shares of China Petroleum and PetroChina closed up 1.39 percent and 0.40 percent, respectively.
In Asian trade, U.S. crude was up 2.02 percent at $33.89 a barrel, after tacking on 2.85 percent in U.S. trade, while the global benchmark Brent gained 2.33 percent to $34.70 after adding around 2.40 percent in U.S. trade.
Despite three successive days of gains in oil, fueled by hopes of reduced production from oil producers in response to the current glut, experts remain divided over whether a deal between Russia and Saudi Arabia will come to fruition.
Both countries have given mixed indications over their willingness to cooperate in recent days.
Evan Lucas, market strategist at spreadbetter IG, dismissed the messages as "jawboning" in his morning note, adding, "The Russian-Saudi talks look to be more about creating price spikes than actual action, and other politics will cause inaction."
"OPEC has shown no willingness to work together and cut production for the past 26 months - its last opportunity to act as one in December ended with production ramping up as forecasted," Lucas wrote. "Russia is one of Tehran's biggest allies - Tehran is looking for an easy re-entry into world oil markets and a high price would offset initial capex issues involved with switching production back on."
Iran's re-entry into the oil market is not in the political or economic interest of Saudi Arabia due to ongoing tension between Tehran and Riyadh over Yemen and Syria, Lucas added.
Mixed economic data from Japan, South Korea
Japan and South Korea released a slew of data on Friday morning.
Japan's core consumer prices were up 0.1 percent in December, on-year, according to government data. The core consumer price index, which includes oil products but excludes fresh food prices, was in line with market expectations.
On the other hand, Japan's household spending and factory output for last month both slumped, indicating continued headwinds in the Japanese economy. Household spending dropped 4.4 percent on-year in December, higher than a market expectation for a 2.4 percent decline. Factory output for December slid 1.4 percent, also worse than a market prediction of 0.3 percent drop.
One of Nikkei's index heavyweights, Fanuc, was down 12.75 percent after reports said the company cut its earnings forecast. According to Reuters, Fanuc cut its operating profit outlook by 3.8 percent to 210.1 billion yen ($1.77 billion) for the year ending March.
On the upside, Takata shares were up 9.72 percent, following reports that the company's chief executive, Shigehisa Takada, is willing to resign to take responsibility for air bag recalls. The Wall Street Journal, citing people familiar with the matter, reported that executives from major carmakers, including Honda, Toyota, Nissan, BMW and Volkswagen will attend a meeting with Takata later today to discuss the company's financial conditions and business plans.
South Korea's industrial output for December grew by a seasonally adjusted 1.3 percent on monthly terms, after a revised 2.1 percent drop in November. A Reuters survey had predicted the median expectation for December output to grow at a tepid rate of 0.3 percent.
Blue chip stocks on the Kospi traded mixed, with shares of heavyweight Samsung Electronics ending up 0.44 percent, while Hyundai Motor shed 1.48 percent.
Overnight on Wall Street
Major U.S. indexes finished Thursday's trading session in the green, with the closing up 125.18 points, or 0.79 percent, at 16,069.64. The S&P 500 was up 10.41 points, or 0.55 percent, at 1,893.36, while the composite gained 38.51 points, or 0.86 percent, to 4,506.68.