In a surprise decision, the BOJ pledged to keep interest rates steady at the close of its two-day meeting on Friday. With mounting pressure for aggressive easing from Prime Minister Shinzo Abe's administration, Governor Kuroda and the central bank also voted to expand an ETF purchases so that their amount outstanding will rise at an annual pace of 6 trillion yen ($56.7 billion), from 3.3 trillion yen previously. It will also double the size of a U.S. dollar lending program.
Kuroda has ordered an assessment of the effectiveness of BOJ policy to be undertaken at the next meeting which is scheduled to take place in September.
Financial markets reacted immediately to the announcement, with the yen climbing against the dollar and bond yields rising to a 1-month high.
The central bank pointed to the recent Brexit vote and volatile global markets as reasons for its move stating, "Against the backdrop of the United Kingdom's vote to leave the European Union and the slowdown in emerging economies, uncertainties surrounding overseas economies have increased and volatile developments have continued in the global financial markets."
28 Trillion Yen Stimulus
Prime Minister Abe said during the week that his government would compile a stimulus package of more than $265 billion to boost the flagging economy. The premier's 28 trillion yen ($265.30 billion) stimulus package, which exceeds initial estimates of around 20 trillion yen, includes 13 trillion yen in fiscal measures that are likely to include spending by national and local governments, as well as loan programs.
According to the BOJ, the latest monetary policy measures and the government's initiatives will produce "synergy effects" on the economy.