By Simon Miller

The Bank of Japan has increased its asset purchasing programme by ¥10trn (£82bn) to about ¥65trn in a bid to end deflation.

The Bank said that for the time being it would "pursue powerful monetary easing by conducting its virtually zero interest rate policy and by implementing the Asset Purchase Programme mainly through the purchase of financial assets".

The BoJ's move took markets by surprise and is an attempt to help nudge the year-on-year inflation rate to 1%.

"The outlook for Japan's economy continues to entail high uncertainty regarding the prospects and outcomes of the European debt problem, the supply and demand balance of electricity and the effects of the yen's appreciation," it said.

"The goal of overcoming deflation will be achieved through such efforts to strengthen growth potential and support from the financial side," the bank said.

"The BoJ apparently bent to political pressure, leaving the market with the impression of its vulnerability," Yuichi Kodama, an economist at Meiji Yasuda Life Insurance told Reuters.

"If the Fed embarks on additional easing, the BoJ is likely to come under pressure again and again and it may tweak its asset purchase scheme and start buying government bonds with longer maturities."

The Bank's policy board also voted unanimously to keep the key interest rate unchanged at between zero and 0.1%.

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