Bank of Japan Announces Additional Monetary Easing

The Bank of Japan on Wednesday said it will extend its asset-purchasing scheme by 10 trillion yen ($128 billion) to boost the economy, following similar moves by the European and U.S. central banks.

The bank's announcement after a two-day meeting, which also saw interest rates kept at record lows, sent the yen tumbling against the dollar and euro, while the Nikkei surged to a four-month high.

The move will see the asset-buying programme -- the main tool for monetary easing that provides liquidity to markets as the bank purchases government and corporate bonds, and commercial paper -- rise to 80 trillion yen.

Finance Minister Jun Azumi welcomed the BoJ decision, saying that the bank "took more action than we anticipated" and it would help to support the economy.

The announcement comes as Japan's export-dependent economy struggles to right itself following a series of problems, including the March 2011 earthquake and tsunami disaster, the European debt crisis, slowing global demand and the strong yen.

Pressure on the central bank to take additional easing steps had been increasing after the European and U.S. central banks took action to support their economies.

A the start of the month the European Central Bank announced a plan to buy sovereign debt to lower borrowing costs to weaker nations, brushing aside German opposition to unleash a so-called "big bazooka" against the debt crisis.

A week later the Federal Reserve unveiled a new bond-buying programme that it said it would not back away from until the economy was on the right track and unemployment was falling.

On foreign exchange markets the dollar soared against the yen, changing hands at 79.11 yen in Tokyo afternoon trade, up from 78.65 before the BoJ announcement, and well up from the 78.80 yen in New York late Tuesday.

The euro also surged, hitting 103.50 yen, up from 102.54 yen in morning trade.

Tokyo shares also jumped, with the benchmark Nikkei 225 index climbing 1.62 percent to its highest level since May.

In its statement Wednesday the BoJ warned "the pick-up in economic activity has come to a pause" in Japan due to the slowing overseas economies.

"There remains a high degree of uncertainty about the global economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy," it said.

"Attention should be given to developments" in global financial markets amid long-lagging European debt problems, it said.