By Ben Eisen, MarketWatch , Hiroyuki Kachi

NEW YORK (MarketWatch) -- The dollar hit its highest level against the yen in nearly seven years on Friday, after the Bank of Japan unexpectedly announced new measures to spur Japanese growth.

The dollar (USDJPY) soared to Yen111.78 from Yen109.22 late Thursday in New York. Meanwhile, the euro (EURJPY) climbed to Yen140.65 from Yen137.72.

"We are getting a bunch of orders" including those from hedge funds, said a senior dealer at a Japanese bank. "Everyone is jumping around with the surprise," the dealer said.

The BOJ on Friday unexpectedly announced additional stimulus measures, underscoring how Prime Minister Shinzo Abe's economic revival plan has gotten off track since a national sales tax increase in April this year damped consumer spending.

Specifically, the BOJ said it would expand its annual asset purchases -- its main tool to spur higher inflation -- to Yen80 trillion from the previous target range of Yen60 trillion to Yen70 trillion. The central bank aims to achieve the new target mostly by buying more Japanese government bonds, cementing its status as the single largest investor in so-called JGBs.

The news helped push the Nikkei Stock Index 4.8% higher.

Earlier in the session, the dollar had already strengthened on hopes for a more aggressive investment approach by Japan's mammoth Government Pension Investment Fund (GPIF).

See: Why Pimco is betting on a stronger dollar

Investors are now keen to monitor details of the GPIF's new portfolio, expected to be released later today. Japan's welfare minister is likely to approve a new portfolio, under which the fund's 60% target allocation to low-yield Japanese bonds will be lowered by roughly half, but instead the fund sharply will increase weightings to Japanese stocks and foreign assets, according to people familiar with the matter.

As the GPIF does not hedge foreign asset holdings against currency risk, its capital outflows lifted the dollar against the yen.

The WSJ Dollar Index , a measure of the dollar against a basket of major currencies, was up 0.7% at 78.45. The euro (EURUSD) fell to $1.2580 from $1.2611 late Thursday.

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