By Kevin Plumberg HONG KONG (Reuters) - Asian stocks outside Japan rose for the first time in four days on Tuesday while the yen and government bond prices fell after a surprisingly large interest rate cut by Australia's central bank raised hopes that other policymakers would follow suit. Major European stock markets were expected to open as much as 2.3 percent higher, according to financial bookmakers, with investors seen scooping up beaten down shares. Panic that U.S. and European governments have not yet found a solution to the plague sweeping through the global financial system had pushed Asian stocks to a near 3-year low earlier. South Korea remained a concern in Asia, with the won sliding to a 7- year low despite the country's president playing down talk of a currency crisis similar to one that nearly broke the economy 10 years ago. The fury with which global equity markets have sold off in recent weeks and the worsening condition of the financial system has made the Group of Seven rich nations meeting starting on Friday even more important. Investors have begun to anticipate some kind of cooperation among countries to solve the crisis, especially after the Reserve Bank of Australia delivered a full percentage point rate cut, the biggest cut in rates since 1992. "Investors believe global central banks could do anything," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities in Tokyo. "The next step could be coordinated interest rate cuts, interventions in the foreign exchange market or more fund injections into money markets. Who knows?" The MSCI index of Asia-Pacific stocks outside of Japan rose 1.5 percent, rebounding from the lowest since December 2005. Australia's benchmark S&P/ASX 200 index jumped 1.7 percent, bouncing from a 3-year low, while Singapore's Straits Times index rose 2.3 percent. Japan's Nikkei share average finished down 3 percent at a five-year low, though was as much as 5 percent lower earlier in the day as an overnight surge in the yen battered exporters. FEAR RULES South Korea's KOSPI rebounded from a 21-month low and rose 0.5 percent. The country's regulator said it was considering steps to reduce volatility in the equity market, helping to stem some of the day's losses. Hong Kong's markets were closed for a public holiday. The $700 billion U.S. rescue fund, ad hoc measures by European governments and massive injections of funds by central banks around the world have not been able to stop confidence in the financial system from evaporating or growing fears the global economy is on path to recession. On Monday, the Dow Jones industrial average closed at a 4-year low after dipping below 10,000 points for the first time since October 2004, and Europe's FTSEurofirst 300 index chalked up its biggest percentage decline ever, shedding 7.8 percent. With the G7 meeting on Friday though, market participants have begun to brace for broader, international action that might include monetary policy action. "The key issue is coordination of policies, since individual country policies aimed at shoring up confidence of domestic institutions can actually exacerbate systemic risk by altering relative risk between countries," said Ashley Davies, currency strategist with UBS in Singapore. "As such, a coordinated global approach by the major financial powers may be critical to containing the destructive aspects of global deleveraging," he said in a note. WILL CENTRAL BANKS WORK TOGETHER? Speculation of growth-friendly policy changes from other central banks spread through markets, causing investors to unravel some pure safety trades. The benchmark 10-year U.S. Treasury note yield, which moves in the opposite direction of the price, climbed to 3.53 percent after dropping to 3.46 percent late on Monday in New York. It was still down some from 3.60 percent late last week, reflecting the heavy demand for government debt as a relatively safe haven from market shockwaves. Japanese 10-year government bond futures were down 0.25 point to 138.30 after rising for three straight days. After a massive surge on Monday, the yen dropped after the Australian rate move caught many by surprise and fueled speculation of bigger cuts from the Federal Reserve, European Central Bank and Bank of England. The dollar rose as much as 1.6 percent against the Japanese currency to 103 yen, pulling further away from a six-month low of 100.22 yen hit on trading platform EBS the previous day. The euro was at 140 yen, up sharply from 136.73 yen late in New York. Gold climbed in the spot market, up 0.6 percent to $863.50 an ounce after rocketing nearly 4 percent on Monday on a flight to anything resembling safety. (Additional reporting by Park Jung-young in SEOUL and Rika Otsuka in TOKYO; Editing by Lincoln Feast)

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