BULLS rampaged through several Asian markets yesterday, led by a sharp surge of 4.38 per cent in Tokyo on the back of falling short-term interest rates and hopes that the Government would unveil a package to lift the economic gloom. In Hong Kong, a Japanese-led futures rally helped send the Hang Seng Index soaring 128.82 points to close at 9,254.03. Japan's Prime Minister Morihiro Hosokawa told the parliamentary budget committee that his administration was preparing to implement tax reforms, industry and financial market deregulation and other measures to spur recovery in the economy and financial markets. In response, the benchmark Nikkei average rose 718.77 points to close at 17,125.31. Chuck Lambert, market analyst at Jardine Fleming Securities (Japan), said the Government had been spurred into action by the sharp decline on Monday, when the Nikkei tumbled more than 1,000 points at one stage after officials said they would not intervene in the stock market. ''The sharp falls on Friday and Monday happened because there were no signs that the Government would do anything to help the economy until the political reform bill was settled,'' he said. However, Mr Lambert said it was important to remember that the market was moving on anticipation that the Government would implement its economic package. In a few weeks, if investors saw no strong steps being taken to revive the economy, the Nikkei would start to correct itself, albeit gradually, he added. Banking shares, which have taken a hammering because of poor interim results, rose 6.49 per cent yesterday. ''The banks were dead and they have sprung back to life very rapidly,'' said Mr Lambert. Another good sign was that volume had picked up, with 370 million shares traded yesterday, compared with an average of 320 million during the past six days, he said. Analysts said falling market interest rates also contributed greatly to the rally. The three-month certificate of deposit (CD) rate, a benchmark for the longer end of the money market, plunged to a record low of 2.08 per cent in the morning. However, analysts expect the Nikkei to remain volatile in the coming weeks. Susumu Moniwa, head of sales at Yamachi International (Hong Kong), said he expected the Nikkei to fluctuate sharply between 16,000 and 18,000 points. Other analysts said index-linked arbitrage buying also contributed to the sharp advance. Other markets posting sharp gains yesterday were Thailand, which jumped 2.4 per cent, and Taiwan, where the benchmark index posted a gain of 2.6 per cent, led by a surge in plastics stocks. The surge in Thailand was due mainly to positive economic indicators. In Malaysia, the key stock index rose 18.97 points, or 1.9 per cent, to close at a new high of 1,015.42 on strong speculative and institutional buying.