The yen surged on Thursday after the Bank of Japan surprised markets by declining to boost its stimulus, battering Japanese stocks and briefly weighing on markets in the United States and Europe.
The yen JPY= surged against the dollar, euro EURJPY= and sterling GBPJPY=, putting it on course for its biggest jump against the dollar since February and its biggest gain in five years against the two European currencies.
The BOJ’s move to hold steady in the face of soft global demand and a sharp rise in the yen was particularly jarring for markets after earlier media reports said the bank intended to cut interest rates deeper into negative territory.
Tokyo’s Nikkei stock index .N225 slumped 3.6 percent.
“I think the odds of (monetary easing) were half and half, but the most surprising point is that the markets seemed to have been surprised,” said Masashi Murata, a currency strategist at Brown Brothers Harriman in Tokyo.
“The most important point is that BOJ, especially (BOJ head Haruhiko) Kuroda, would like to save its weapons and power for an emergency.”
The Tokyo Stock Exchange will be closed for a national holiday on Friday and the benchmark Nikkei index ended the shortened trading week down 5 percent.
U.S. stock markets opened lower, but rebounded, bolstered by strong results from Facebook and a flurry of dealmaking.
Facebook (FB.O) hit an all-time high of $120.79 a share after the company said Wednesday that quarterly ad revenue jumped 57 percent. Its shares were last up 9.1 percent at $118.77. [.N]
St. Jude Medical (STJ.N) soared 27.5 percent after Abbott Laboratories (ABT.N) said it agreed to buy the medical device maker for $25 billion. Abbott was down 5.6 percent.
The Dow Jones industrial average .DJI fell 11.47 points, or 0.06 percent, to 18,030.08, the S&P 500 .SPX gained 3.9 points, or 0.19 percent, to 2,099.05 and the Nasdaq Composite .IXIC added 24.92 points, or 0.51 percent, to 4,888.06.
The pan-European FTSEurofirst 300 .FTEU3 rose 0.1 percent, recovering from earlier losses after the BOJ decision on the back of gains in materials and energy stocks.