The Nikkei average soared almost 14 per cent this morning and was set for the biggest one-day gain in its nearly 60-year history after governments around the world pledged to support struggling banks and restore confidence in the financial system.
But even that dramatic jump clawed back only about half the losses incurred last week, when the Nikkei lost 24 percent. On Friday alone, it plunged 9.6 per cent for its biggest drop since the 1987 stock market crash.
Mitsubishi UFJ Financial Group shares surged more than 14 per cent to their daily limit-high after Japan's top bank delivered on a planned $9 billion investment in US firm Morgan Stanley
"It's not surprising that we have a technical rebound along with the European, the U.S. and Asian markets after Friday's global selling-climax," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, adding the jump is mainly due to short-covering rather than the inflow of new money.
"There's a relief that banks probably wouldn't go bankrupt thanks to money injection plans, but after some rebound, we will inevitably enter a phase to think about how that would actually impact the global economy."
As of 0415 GMT, the benchmark Nikkei surged 1,127.11 points to 9,403.54, a 13.62 per cent climb that would put it ahead of a record 13.24 percent jump logged on October 2 1990.
The broader Topix gained 13 percent to 950.07.
Reuters