Bank of Japan's surprise stimulus summons bullish Halloween spirits

Japan ignited a Halloween rally in Asian markets by announcing a surprise expansion of monetary stimulus just days after the US Federal Reserve ended its bond buying programme, with Hong Kong shares finishing at their highest in six weeks and other Asian markets following suit.

The rally could further stoke a surge in global equities, turning the near 10 per cent rout that struck US and other financial markets earlier this month into a dim memory.

Bank of Japan (BOJ) Governor Haruhiko Kuroda portrayed the decision as a pre-emptive strike to keep policy on track, rather than an admission his plan to reflate the long moribund-economy had derailed. In a rare split verdict, the BOJ's board voted 5-4 to accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of 80 trillion yen (HK$5.6 trillion), up by 30 trillion yen.

"We decided to expand the quantitative and qualitative easing to ensure the early achievement of our price target," he said, reaffirming the BOJ's goal of pushing consumer price inflation to 2 per cent next year.

"We are in a critical moment in the effort to break free from the deflationary mindset."

Markets reacted with a frenetic rally. Hong Kong stocks finished at their highest since September 19, tracking rallies in Asia and European markets, as investors turned their attention away from the initial disappointment over the delay in the stock connect scheme linking the exchange to Shanghai.

The benchmark Hang Seng Index climbed 1.25 per cent, or 296.02 points, to close at 23,998.06. In Shanghai, the benchmark jumped 1.22 per cent, or 29.10 points, to finish at 2,420.18 - the highest since February last year and its best monthly gain since 2009.