Japan leads world stock markets higher on stimulus hope

He also defended the premier's "Abenomics" stimulus policies aimed at eradicating deflation, saying that the media was fanning excessive pessimism over the country's growth prospects and making Japanese companies and investors wary of investing. There has been no letup from the euphoria of a very strong June non-farm payroll print from last week, while political risks in the U.K, Japan, and Australia has abated, at least for the time being.

After the sweeping victory of prime minister Shinzo Abe in the Upper House election on Sunday, Japanese shares regained their lost ground and have already logged their "biggest gain in nearly five months".

Moreover, Japan's adviser to Prime Minister Shinzō Abe, Koichi Hamada said that Japanese stocks have been oversold and helicopter money would be a risky gamble.

By utilizing the "zaito" loan program created to lend public money to the private sector at low interest rates, the government will help accelerate the extension of a magnetically levitated train line from Tokyo to Osaka.

Some of the more optimistic analysts have noted that there have only been 20 occasions in the past when the S&P500 has dawdled for more than a year without setting a new 52-week high.

That came close on the heels of a considerably stronger than expected reading on the USA jobs market on 8 July, although the latest wage numbers came in on the weak side. The Kospi average climbed 14.32 points or 0.72% to 2,005.55, its highest level since June 10.

The yen is a popular haven asset, along with gold and highly rated government debt.

At the same time, investors are eagerly awaiting the announcement of a major Japanese fiscal stimulus package after Japanese Prime Minister Shinzo Abe's ruling coalition won a sweeping victory in Upper House elections on the weekend. Market speculation that Japan may resort to helicopter money heightened after Bernanke met Abe on Tuesday.

Market strategists expect monetary and fiscal stimulus to go hand in hand.

"Hitting the government's (fiscal discipline) goals is extremely hard", said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

This, in turn, could give the Bank of Japan room to ramp up the pace of its bond purchases.

The market has had a rough ride in the year since the S&P 500's last record.

Kazuo Momma, former executive director and assistant governor of the Bank of Japan, told Bloomberg on Monday that the BOJ is aware of the market's limitations - but that it could increase the rate of bond buying anyway. For the week, the dollar is up about 3.8 percent against the yen. This yen pullback has helped lead to a strong rebound for EUR/JPY this week, lifting the currency pair from near its multi-year lows around 111.00 support to hit key resistance around the 116.00 level.

Why is a Weaker Yen Necessary to Boost Japanese Stocks? The Nikkei 225 Index closed up 0.8% on Wednesday following gains of more than 6% over the previous two days combined. Two-year German yields DE2YT=TWEB fell as far minus 0.7 percent, close to a record in anticipation of easier policy from the European Central Bank.

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