Tokyo (Alliance News) - The Bank of Japan said Tuesday it had decided to maintain aggressive monetary-easing measures to prop up the world's third-largest economy and overcome chronic deflation.
The central bank said it would extend its special loan programmes for one year to encourage banks to spur lending to businesses with growth potential and support the economic recovery.
The size of the fund would be doubled to 7 trillion yen (68 billion dollars) from 3.5 trillion yen.
The decision helped the benchmark Nikkei 225 Stock Average surge 3.1% on Tuesday.
The announcement came on the heels of weaker-than-estimated domestic growth data. The government reported on Monday that Japan's economy grew at an annual rate of 1.0% in the October-December period, less than expected amid weak exports.
Despite the disappointing figures, the bank said in a statement that "Japan's economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed."
Economists predicted consumer spending would continue to rise in the current quarter, but a sharp slowdown is expected after the sales tax hike in April, when the Japanese government will raise the current 5% rate to 8%.
Prime Minister Shinzo Abe and the bank's governor Haruhiko Kuroda vowed to pull the country's economy out of 15 years of deflation.
In April, the central bank introduced its monetary-easing policy with the aim of achieving 2% inflation within about 2 years.
Consumer prices climbed 0.4% in 2013 for the first rise in five years amid aggressive monetary easing.