Japan’s central bank, Bank of Japan, has expanded two key lending programmes to try to boost economic growth.
It has doubled the size of one facility to 7 trillion yen ($68bn; £41bn) and said banks can now borrow twice as much money at low rates as previously under the second programme.
The central bank also extended the expiry of both schemes by one year.
The move comes just a day after Japan reported disappointing growth numbers for the October-to-December quarter.
Its gross domestic product rose by 1% on an annualised basis during the period, much lower than analyst forecasts of an expansion of close to 2.8%.
The weaker than expected data had raised questions on whether Japan’s recovery – triggered by a series of aggressive stimulus and policy moves over the past year – can be sustained.
‘Continued to recover’
However, the central bank was upbeat on the progress the economy has made.
“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,” the bank was quoted as saying by the AFP news agency.
Japan has announced an increase in the sales tax – also known as consumption tax – in an attempt to rein in its public debt.
The consumption tax is set to rise to 8% from 1 April from the current 5% level.
However, there have been concerns that the move may see consumers hold back on spending due to rising prices and that may hurt the economy.
Analysts said they expect the central bank to take further steps to help cushion the impact of the tax rise and to support the ongoing recovery.
“It was no surprise that the Bank of Japan did not change course at today’s meeting, but we still think that more easing will eventually be required,” said Marcel Thieliant, Japan economist with Capital Economics.
The central bank maintained its pledge to expand the monetary base by 60 trillion to 70 trillion yen per year.
Japanese shares rose on the central bank’s move with the Nikkei 225 index gaining more than 3%.