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Asian Markets Bounce Higher as BOJ to Ease Liquidity

Asia stocks gained momentum in the afternoon to trade firmly in positive territory after the Bank of Japan said it would buy corporate bonds to ease an increasingly severe funding squeeze. Financials were mostly higher across the board after bank shares fuelled a Wall Street rally, but with global economic gloom still pervasive, safe-haven trades such as the yen and U.S. Treasuries also rose.

China's economic growth slumped to 6.8% last quarter, dragging down the pace of expansion for all of 2008 to a seven-year low of 9.0% as the full force of the global financial crisis struck home. Asia trade activity has collapsed in recent months, with reports showing a record decline in Japanese exports in December and South Korea's economy slowing twice as quickly as forecast in the fourth quarter of 2008.

The U.S. dollar fell against the yen, after rebounding from Wednesday's low of 87.10 yen, the lowest since July 1995. The euro dropped also dropped against the yen, falling towards a near 7-year low of 112.08 yen. U.S. crude futures steadied, after rallying more than 6 percent the previous day. Crude futures for March deliver were trading above $43 a barrel.

Japan's Nikkei 225 Average reversed early losses to close 1.9 percent higher after the Bank of Japan said it would accept bonds issued by REITsas collateral, offsetting a tumble in Honda Motor and other exporters hit by a firm yen. Financials such as Mitsubishi UFJ Financial Group gained after their U.S. peers rose, while brokerages climbed on a ratings upgrade. Sony lost 2.6 percent ahead of an announcement that it would book alarger-than-expected operating loss of $2.9 billion this business year as the global downturn took its toll.

Seoul shares finished 1.1 percent up, led by banks and helped by Kia Motors after the carmaker reported better-than-expected earnings, but grim GDP data and caution ahead of earnings later in the day limited gains. South Korea said GDP fell a seasonally adjusted 5.6 percent in the fourth quarter, pushing the economy a big step closer to its first recession in a decade. LG Electronics tumbled 3.7 percent as it swung to a record loss in the fourth-quarter while Hyundai Motor pared back early losses to end fell 2.9 percent lower after posting a 28 percent decline in quarterly earnings.

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Australian stocks closed up 1.3 percent led by the top banks after a rise on Wall Street following upbeat results from technology giant IBM and a rebound in financial stocks. National Australia Bank rose 2.8 percent. Australia's largest gold miner Newcrest Mining fell 3.5 percent after the company reported a 16.2 percent fall in gold production in the three-months to December and lowered its full-year output forecast.

Hong Kong shares climbed 0.6 percent, with investors snapping up battered financial stocks after a long bout of nervous selling. Europe's biggest lender HSBC rose 3.6 percent higher after an eight-day decline, while blue chip HutchisonWhampoa gained 0.1 percent.

Singapore's Straits Times Index was 0.2 percent higher. Shares got a boost from Wall Street's recovery, but the upside was limited with investors awaiting Singapore budget
announcement due later in the session.

Chinese shares gained 1 percent after the release of largely consensus-meeting fourth-quarter GDP figures.