Japanese stocks surged and markets elsewhere in Asia strengthened on Friday, tracking substantial gains on Wall Street after encouraging US retail sales data reassured investors about the health of the world's biggest economy.
The key Nikkei 225 index added more than three-and-a-half percent following rallies on Wall Street, continuing a bullish run after stocks in Tokyo crashed Monday on worries about the US economy and a stronger yen.
Encouraging economic growth in Japan had already spurred the market on Thursday.
"Stabilising market conditions mean that the BoJ could again consider further policy normalisation," Alvin Tan, from RBC Capital Markets, said in a note.
"But the shock of the recent Japan equities tumble and yen surge means that another hike likely won't be on the table in the BoJ's September meeting."
The dollar rose more than one percent against the yen after the retail sales report was released.
A weaker-than-expected labour market report recently sparked turmoil over fears that the world's biggest economy was in worse health than anticipated -- but continued spending should allay recession worries.
"That lacklustre jobs data had everyone on edge, worried that the economy might crack under the pressure of high interest rates," said independent analyst Stephen Innes.
"But Thursday's numbers hint that the Fed might just pull off the impossible -- a soft landing, slowing the economy just enough to snuff out inflation without plunging us into a recession."
Chinese data on Thursday showed the country's industrial production slowing and unemployment rising in July, while consumer spending marginally beat analysts' expectations.
But Hong Kong's Hang Seng index, which has had the wind taken out of its sails over the past several months, enjoyed a strong day.
Despite a nearly 30 percent dip in quarterly profit reported on Thursday, Chinese tech giant Alibaba saw its stock soar in Hong Kong after it recorded gains in New York.
Alibaba runs some of China's most popular e-commerce apps and its performance is widely considered an indicator of broader economic trends.
Stocks in Shanghai also ended marginally higher while Singapore, Seoul, Sydney, Taipei, Manila, Bangkok, and Jakarta all posted gains.
In Europe, Paris and Frankfurt both rose in early trade while London edged marginally lower.
Tokyo - Nikkei 225: UP 3.6 percent at 38,062.67 (close)
Hong Kong - Hang Seng Index: UP 1.9 percent at 17,430.16 (close)
Shanghai - Composite: UP 0.1 percent at 2,879.43 (close)
London - FTSE 100: DOWN 0.2 percent at 8,3334.90
Euro/dollar: UP at $1.0988 from $1.0972
Pound/dollar: UP at $1.2887 from $1.2853
Dollar/yen: DOWN at 148.84 yen from 149.06 yen
Euro/pound: DOWN at 85.26 pence from 85.36 pence
Brent North Sea Crude: DOWN 0.2 percent at $80.84 per barrel
West Texas Intermediate: DOWN 0.4 percent at $77.86 per barrel
New York - Dow: UP 1.4 percent at 40,563.06 points (close)
