* European shares track Asian markets higher
* BOJ unexpectedly adopts negative rates in big stimulus
step
* Yen falls broadly, 10-year JGB yield plumbs record low
* BOJ, supply deal talk give oil another session of gains
By Jemima Kelly
LONDON, Jan 29 (Reuters) - World shares jumped and the yen
slumped on Friday after the Bank of Japan stunned markets by
taking one of its main interest rates into negative territory,
its boldest step yet to reinflate the economy.
The yield on Japanese benchmark government bonds plunged to
record lows JP10YTN=JBTC after the central said it would
charge 0.1 percent for excess reserves parked with the
institution, an aggressive policy pioneered by the European
Central Bank.
The central bank said in a statement it would cut interest
rates further if it judged it necessary.
Most investors had believed Japan's policymakers were too
cautious to ever adopt such a radical measure. Their reaction
sent the dollar surging about three yen to an almost six-week
high of 121.495 JPY= . It was last up 1.7 percent at 120.87
yen.
European shares tracked Asian stock markets higher, with the
pan-European FTSEurofirst 300 .FTEU3 index bouncing back 1.2
percent by 0930 GMT, having fallen 1.7 percent on Thursday.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 45 countries, rose half a percent.
"It has become clear that stock markets cannot stand on
their own feet," said KBC senior economist Koen De Leus, in
Brussels. "As long as the economy is shaky and the world is
burdened with high debt, central banks and their money printing
machines are a necessary evil to keep up the markets."
The plunge in Japanese bond yields set up a positive tone
for other major bond markets.
Germany's 10-year Bund yield fell four basis points to a
nine-month low at 0.29 percent DE10YT=TWEB , while two-year
German bond yields touched a fresh record low at minus 0.471
percent. The yield on 10-year U.S. Treasuries meanwhile fell 4
basis points to 1.95 percent US10YT=TWEB .
The dollar was up 0.4 percent against a basket of major
currencies at 98.885 .DXY , though still down about 0.7 percent
for the week.
OIL GAINS
The promise of extra global stimulus gave an added fillip to
oil, which had already risen for three sessions on talk of a
possible deal to pare back excess supply. O/R
U.S. crude CLc1 added about 0.7 percent to $33.45 per
barrel, while Brent futures LCOc1 firmed 0.9 percent to
$34.18. That put oil on track for a second weekly gain, though
oil volatility has climbed to its highest since 2009 as traders
try to price in the uncertainty around supply cuts.
Earlier, Japan's Nikkei share index .N225 whipsawed on the
BOJ announcement before ending up 2.8 percent, to mark a 3.3
percent weekly gain. .T
The central bank's move gave a lift to bourses across the
region, even though economists at HSBC and elsewhere doubted it
would give a boost to Japan's real economy or inflation.
"We do not think negative rates are a game changer," said
Commerzbank (DE:CBKG) strategist Esther Reichelt, in Frankfurt. "Pressure
on the BoJ will mount to do even more in coming months to attain
their inflation target."
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS added 1.8 percent, up 2.7 percent for the week .
The Shanghai Composite Index .SSEC rose 2.9 percent, while
the CSI300 index .CSI300 of the largest listed companies in
Shanghai and Shenzhen added 3.2 percent, bouncing from steep
losses early in the week.
The buying spread to U.S. debt markets as investors wagered
the BOJ decision and a stronger dollar would make it even harder
for the Federal Reserve to hike rates four times this year, as
originally envisioned by its policy board.
Fed fund futures 0#FF: rose to imply a rate of 51 basis
points by year end, compared to 90 basis points a month ago.
Futures for U.S. 10-year bonds 0#TZY: rose 5 ticks.