Asia: Surprise Japan decision sends markets into decline

The central bank announced new measures, which would supplement its easing programme, including a plan to purchase exchange-traded stock funds worth up to JPY300bn (£1.66bn).

Initial reactions on Japanese markets were positive, but that excitement quickly subsided as the relative scale of the programme, when compared to the country's lengthy economic struggle, caused many analysts to question its probable effectiveness.

"They're all helpful measures, but they won't make much difference in practice,", said Marcel Thieliant of Capital Economics.

He described the additional stock funds purchases as "miniscule".

Other analysts described the move as a technical measure, rather than additional easing. Shingo Ide of the NLI Research Institute said that given Japanese stocks were trading up to 15% higher than 12 months ago, the Bank of Japan needed to but more exchange-traded stock funds for its easing to have the same effect.

"I doubt that the impact of this new plan will be big on the Japanese economy and equity market", said Steven Leung of UOB Kay Hian.

The Nikkei Stock Average closed down 1.9% at 18986.8. It briefly peaked up 2% following the Bank of Japan's announcement, to a fortnightly high.

Currency-wise, the yen fell to JPY123.48 against the dollar, but later strengthened to sit at JPY122.00.

Elsewhere in the region, markets were mixed. The Hang Seng fell 0.5%, the Shanghai Composite was flat, and the Kospi lost 0.1%. In Sydney, the S&P/ASX 200 gained slightly, up 0.1%.

It appeared investors were shifting their focus away from the confidence-boosting Federal Reserve announcement which lifted the mood on Thursday, and back to other factors which had been more prominent in recent weeks.

The strengthening dollar's effect on commodity prices, such as oil, was one concern analysts pointed to. Further slides in oil prices would see some concerns resurface, such as the ability of energy firms to pay their debts.

Oil prices were down again overnight, with NYMEX Electronic slipping 1.6% to $34.95 a barrel and London Brent losing 0.9% to $37.06 - the lowest level since December 2008.

In Australia, the materials sector saw stocks fall 1.5%, and the energy sector slipped 0.6%, deepening the losses the two industries have felt already in December at 4% and 13% respectively. Liquefied Natural Gas Ltd slipped 8.7% and Oil Search Ltd lost 1.3%.

It was non-flammable liquid which rallied on the southern markets, with the New Zealand-based A2 Milk Company skyrocketing 30% in Sydney and 28% in Wellington after revising revenue expectations upward for the second time in two months.

At 11:54 GMT on Friday, the Aussie was trading at USD$0.71250 and the Kiwi at USD$0.67014.