Japanese shares have jumped 7.7 per cent on a more optimistic outlook on China, news of Japanese tax cuts and the reduced likelihood of an imminent US rate rise.
The Nikkei 225 closed at 18, 770.51, the 7.7 per cent rise marking the index’s biggest gain since October 2008.
The Financial Times reports comments from Citi analysts on the “search for a smoking gun” to explain the turnaround in sentiment.
The Nikkei is said to have been buoyed the by 2.5 per cent increase in the S&P 500 after the US Labor Day holiday, as well as an announcement from China’s Ministry of Finance that it would carry out “stronger proactive fiscal policy” to bring about growth.
Commodities are also up on the expectation of stronger demand in China, with Brent crude up 0.2 per cent at $49.61 a barrel.
Fears over the sustainability of China’s growth have also led traders to believe the Federal Reserve is less likely to raise interest rates next week.
Market gains have also been attributed to the news that prime minister Shinzo Abe plans to cut corporate taxes by at least 3.3 per cent in the 2016 financial year.