The Bank of Japan surprised financial markets today by further loosening its already ultra-easy monetary policy.
It is the bank's fourth easing this year in a bid to pull the world's second-largest economy from the edge of recession.
The easing consists primarily of providing banks with extra reserves to back up additional lending. The central bank does this by increasing the volume of current account deposits lodged at the central bank to six trillion yen ($49 billion) from five trillion yen.
"The global economy is falling at a stronger pace than we had previously thought," BOJ governor Mr Masaru Hayami told reporters.
But many economists doubted whether the easing would be enough to rekindle consumer spending, the biggest and most persistently weak area of the economy, or translate into a fresh burst of lending by Japan's debt-choked banks.
They said the main aim was likely to help cushion the pain from reforms planned by Prime Minister Mr Junichiro Koizumi as he grapples with an economy suffering from steady price declines, rising bankruptcies and dwindling industrial output.
The stock market indicated its approval, jumping more than 4 per cent at one point before settling to close up 3.84 per cent at 11,917.95 - its biggest one-day percentage gain since April and breaking a four-day losing streak.
Analysts say the easing means the central bank is trying harder to force-feed banks with virtually free money, although it has repeatedly warned that structural problems in the banking sector were limiting the amount of funds flowing into businesses.