The yen tumbled while Japanese stocks and government bonds rallied on Monday as the Bank of Japan lost no time embarking on its ambitious stimulus drive, but weak U.S. jobs data and regional risks such as North Korea weighed on other assets.
European markets were likely to inch higher, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open as much as 0.5 percent higher. U.S. stock futures were up 0.1 percent to suggest a firm Wall Street open.
The MSCI's broadest index of Asia-Pacific shares outside Japan fell as much as 0.5 percent to a four-month low before trimming some losses to fall 0.3 percent. Shanghai shares led the decline, after falling sharply to a 3-1/2-month low earlier as bird flu worries hit tourism-related sectors and the property sector lost ground on more sales curbs.
South Korean shares dipped to new four-month lows and the South Korean won fell to its weakest level in more than eight months of 1,139.6 against the dollar, as increasingly strident rhetoric by North Korea raised concerns that Pyongyang may conduct a nuclear test or a missile launch this week.
Friday's weaker-than-expected U.S. nonfarm payrolls report raised worries about slowing growth momentum and weakening demand from the world's largest economy.
But any bearishness toward the dollar was overwhelmed by speculators squarely focusing on the prospect of a sustained period of yen weakness as the BOJ set about implementing the world's most intense monetary stimulus.
"The oil markets are currently enjoying the support of upcoming liquidity after the BOJ announcement last week, but they are still digesting the disappointing jobs data from the U.S.," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.
Brent crude oil rose 0.4 percent to $104.56 a barrel after touching an eight-month low on Friday on worries about weakening fuel demand in the U.S. and U.S. crude futures inched up 0.2 percent to $92.88.
The BOJ conducted its first government bond buying operation on Monday since announcing monetary easing on a stunning scale, saying it will buy one trillion yen ($10.3 billion) of Japanese government bonds of between five and ten years maturity, and 200 billion of bonds with maturities exceeding 10 years.
The dollar jumped a full yen in early Asian trading to hit 98.85 yen, the highest since June 2009, while the euro climbed as far as 128.42 yen, its highest since January 2010. The Aussie dollar soared to 102.34 yen, the highest since July 2008.
Japan's Nikkei stock average jumped as much as 3.1 percent to its highest since August 2008 earlier, before shedding some gains.
"The BOJ's bazooka has sparked the buying of Japanese stocks, especially domestic sectors, like real estate," said Yasuo Sakuma, a portfolio manager at Bayview Asset Management.
JAPAN INVESTORS KEY TO YEN TREND
Traders saw the market taking the dollar through the 100-yen level as early as this week, and could aim for 102-103 yen in coming weeks. The dollar last hit 100 yen in April 2009. By late morning in Asia, however, the yen had steadied slightly from its early lows.
The BOJ promised last Thursday to inject about $1.4 trillion into the economy in less than two years, in a radical gamble to beat Japan's deep-rooted deflation.
"The weak yen trend driven by expectations for aggressive BOJ easing remains firmly in place, and there now seems to be a strong conviction by market players that the yen will continue to weaken, with the 100 yen seen only as a transitional point," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
"Aside from something psychological, there isn't any reason to stop the dollar at 100 yen. The way the yen is sold despite the weak U.S. jobs data, there is really no reason to buy the yen right now," he said.
With the key U.S. jobs data out of the way, Yunosuke Ikeda, senior currency economist at Nomura Securities, saw investors being more comfortable taking long-term positions that would see the dollar/yen rate climb over a sustained period.
And Japanese institutional investors will hold key to the sustainability and pace of yen selling, as they were seen mulling removing currency hedges later this year if signs emerge of slowing accommodative monetary policy in the United States and if Japanese stocks continued to rally on hopes for structural reforms that would help spur growth in Japan.
"The BOJ's easing is squashing superlong Japanese government bond yields, which raises speculation that Japanese life insurers will shift some of their funds to unhedged foreign bond buying to some extent," Ikeda said.
The yen's weakness on the back of the BOJ's reflationary commitment bolstered Japanese gold futures by almost 5 percent to 5,025 yen ($51.71) per gram, just below its all-time high of 5,081 yen hit in early February.
Spot gold fell 0.3 percent to $1,576.74 an ounce.
"People are really pulling funds out of gold for better investments such as equities and real estate in emerging economies," said Joyce Liu, investment analyst at Phillip Futures.
London copper rebounded, up 0.6 percent to $7,453 a tonne, after dropping for three consecutive weeks, although the bleak U.S. jobs report for March was likely to keep a lid on prices.
