Asian shares pushed higher on Friday on firm U.S. data despite a two-notch downgrade of Spain's credit rating that capped gains, while fresh easing measures by the Bank of Japan supported Tokyo stocks.
Japan's central bank moved as expected to help fight deep deflation, initially pushing Japanese stocks up more than 1 percent and helping drag the broader Asian stock higher.
MSCI's broadest index of Asia-Pacific shares outside Japan extended gains to a 0.4 percent rise, headed by the technology sector with a 1.6 percent rise. At current levels, the index was set for a 0.2 percent weekly gain.
Seoul shares outperformed, rising on the back of a record $5.15 billion first-quarter profit by Samsung Electronics, which boosted its shares by more than 3 percent to an all-time intraday high of 1.383 million won.
The Bank of Japan, facing mounting government pressure, eased policy further by boosting its asset purchases by 10 trillion yen ($124 billion), more than markets had expected, and said it would buy longer-term government bonds in a show of resolve to pull the economy out of deflation.
The BOJ increased by a small amount purchases of exchange-traded funds and trust funds investing in property, while extending the duration of government and corporate bonds it targets under the scheme to three years from two years now.
"A stepped up buying of risk assets is clearly an easing, as well as an extension of the duration of bonds the BOJ buys," said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
"But the net increase in combined asset buying was 5 trillion yen, the lower end of expectations, so that's not really an easing markets were looking for. Overall, the outcome failed to impress," he said.
A knee-jerk initial reaction in the currency market reflected this view, as the yen first firmed to 80.40 yen, then fell against the dollar to 81.35 yen. The yen last stood at 81.17.
The euro was down 0.1 percent at $1.3201, pressured by the S&P cutting Spanish ratings by two notches to BBB-plus due to its deteriorating public finances.
The currency had climbed to a three-week peak near $1.3264 on Thursday. The dollar index measured against a basket of key currencies inched up 0.3 percent after hitting a 3-1/2 week low on Thursday.
"The price action reflects strong market nervousness over the European problem, and that investors have yet to take on risk," said Junya Tanase, chief foreign exchange strategist at JPMorgan Bank in Tokyo.
If worries over the European situation intensified, that could also offset yen-selling pressures from the BOJ's further monetary stimulus, he added.
US DATA REASSURES
Thursday's data showing U.S. contracts to purchase previously owned homes stood near a two-year high in March added to economic optimism already spreading following solid earnings and the Federal Reserve's earlier pledge to keep accommodative monetary policy as long as needed.
Copper and oil eased on Friday as the dollar firmed, with copper hovering near $8,315 a tonne as renewed worries about the debt-laden euro zone trimmed appetite for riskier assets.
U.S. crude futures fell 0.4 percent at $104.10 a barrel while Brent crude fell 0.4 percent at $119.50.
Spanish debt downgrade sapped sentiment in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 4 basis points.
Fears about refinancing ability by some of the deeply indebted euro zone countries prompted safe-haven buying in U.S. Treasuries, sending the 10-year yield down to 1.91 percent from 1.95 percent in late U.S. trade.
BEARISH STORY IN EUROPE
Europe saw a different story, with shares closing little changed on Thursday, as worse-than-expected results by Germany's biggest lender, Deutsche Bank, followed data showing the euro zone's economic sentiment fell more than expected in April.
Underscoring an urgent task to restore investor confidence in the region's fragile banks, the European Central Bank called on authorities on Thursday to set up a body to manage bank rescues in the euro zone, coming as European governments were starting to see the idea of a rescue fund covering all euro zone banks as possibly the only way to stamp out market jitters.