The Federal Reserve's radical step of cutting interest rates to between zero and 0.25 percent quickly prompted rate cuts elsewhere on Wednesday and threw the focus firmly forward to a Bank of Japan (BOJ) meeting.
Hong Kong followed the Fed with a full point rate cut to a record low of 0.5 percent and Kuwait's central bank essayed a half-point cut to 3.75 percent.
Norway's central bank is expected to cut its key rate by 100 basis points to 3.75 percent later on Wednesday although a number of economists now forecast an even bigger reduction.
With rates near zero, the Fed said it would employ "all available tools", echoing Japan's policy of a decade ago when it flooded banks with money to promote lending.
The U.S. is mired in a recession that some fear could prove to be the worst since the Great Depression. It has dragged much of the globe with it, following the meltdown of its housing market in 2007 and the massive bank losses that resulted.
The Fed's move could push the BOJ to cut rates from 0.3 percent when it meets on Thursday and Friday and maybe follow the Fed in buying commercial paper outright or purchasing asset-backed securities, reviving a policy it used during its banking crisis.
"Everyone is now looking at the Bank of Japan, which may feel compelled to cut rates," said David Cohen, director of Asian economic forecasting with Action Economics in Singapore.
European shares gained 0.8 percent but Japan's Nikkei share average dropped 0.5 percent as strength in the yen hit exporter stocks already facing weak global demand.
The prospect of effectively littering the financial system with dollars pushed the U.S. currency to an 11-week low.
"QUANTITATIVE EASING"
Central banks across the globe are slashing rates and eyeing unorthodox policy measures as the financial crisis sends many countries into recession and slows growth in China.
A Reuters poll showed primary dealers — banks that deal directly with the Fed — expected it to keep rates at the new ultra-low level until at least the second half of 2009 and to throw an additional $1 trillion or more at the crisis.
The Fed said it was prepared to expand a plan to purchase debt issued or guaranteed by government-sponsored mortgage agencies. It also said it was mulling purchases of longer-term U.S. Treasury debt and would consider other ways to tap its burgeoning balance sheet to support the economy.
A series of initiatives to encourage lending by loss-scarred banks has already pushed the Fed's balance sheet to $2.2 trillion from $887 billion over the last three months. Some analysts think it could eventually top $3 trillion.
The rapid expansion amounts to a form of quantitative easing, a policy pursued by Japan to expand the supply and circulation of money after it was forced to lower rates to zero.
A Fed official told reporters it was not pursuing Japanese-style measures but was buying securities and making loans to improve mortgage and credit market conditions, although that also happened to expand its balance sheet.
"From here, it's really the Fed trying to use their balance sheet to support the economy," said Andrew Hanlan, senior economist at Westpac in Sydney. "I think the buck now passes on from the Fed to the U.S. government to try to boost growth.
U.S. President-elect Barack Obama reiterated his government would play its part given interest rate ammunition was "running out". He plans a massive stimulus programme.
It is critical that the other branches of government step up and that's why the economic recovery plan is so absolutely crucial," he said.
Japan's top government spokesman said it hoped the BOJ would adopt measures to provide ample liquidity when the bank's board meets and said it must support the economy.
CORPORATE WRECKAGE
The damage from the financial crisis is clearly visible in economic data and corporate balance sheets.
Shares in Honda Motor Co slid nearly 5 percent as Japan's No.2 automaker looked set to issue its third profit warning in five months, citing huge currency losses and tanking car sales.
As the impact of the sagging U.S. auto industry spread around the world, investors hoped to see the Bush administration approve loans for carmakers with funds from its bank rescue scheme.
"The automakers will get the money as quickly as we can prudently do it," U.S. Treasury Secretary Henry Paulson said in an interview on CNBC television on Tuesday.
Investors will also look to an OPEC meeting in Algeria, where major producers are expected to announce their biggest oil supply cut ever to address the first drop in world oil demand in 25 years. Oil prices have plunged over $100 from their all-time high in July.
