Japanese shares jumped nearly three per cent and the yen tumbles after the Group of Seven agreed on rare joint intervention to curb the soaring currency and calm markets jittery over Japan's nuclear power plant crisis.
But the stock rally does not mean dramatic gyrations seen this week are over because the crisis at the power plant is still unfolding and the full impact of last Friday's devastating earthquake and tsunami is not clear, dealers said.
The move by the G7 to support the country as Japan struggles to cope with its biggest crisis since World War Two comes a day after the yen soared to a record 76.25 in chaotic trading.
The dollar rose more than three per cent to around 81.75 yen after the G7 announcement, which came just as the Tokyo stock market opened.
"It was as clear as it could be and it was huge," said Imre Speizer, a senior strategist at Westpac Bank in Wellington. "They said they will intervene and the whole world will intervene. This is much bigger than earlier expected."
"This is huge and it's having commercial effect. There can be a lot more upside in dollar/yen before the next 24 hours is over. Global coordinated intervention is very rare, but when it occurs it is usually very successful."
Equity markets elsewhere in Asia rose after the G7 bid to stabilise global markets, with the MSCI ex-Japan indexup 1.3 percent.
The G7 decision following a teleconference surprised markets. Investors had expected Bank of Japan to intervene to rein in the rampant yen, but had not expected coordinated central bank action by the world's wealthiest countries.
"This is the first coordinated intervention we have seen since 2000, so it's going to have a very huge resonating effect on the market," said Kathy Lien, director of currency research at GFT in New York.
City A.M. Reporter