TOKYO - Japan's central bank on Thursday kept its key interest rate at nearly zero and will expand the size of an asset buying program to lend stronger support to the economy.
The Bank of Japan's policy board decided unanimously at a one-day meeting to leave the overnight call rate target at zero to 0.1 per cent.
It voted 8-1 to increase its asset purchase program by 5 trillion yen to 55 trillion yen ($723 billion). It will use the extra funds to buy Japanese government bonds, hoping that further monetary easing will offset the export-sapping strength of the yen.
Uncertainty about the U.S. and European economies helped push the dollar to a record low against the yen for a second straight day Wednesday.
Both the dollar and the yen typically serve as safe, stable investments during periods of uncertainty. The yen has gained favour against the dollar in part because traders fear that the Federal Reserve will take more action to bring down long-term interest rates.
The central bank still expects the world's No. 3 economy to eventually return to moderate growth.
"However, some more time will be needed to confirm that price stability is in sight and due attention is needed for the risk that the economic and price outlook will further deteriorate depending on developments in global financial markets and overseas economies," it said in a statement.
The central bank pledged to maintain powerful monetary easing, ensure stability in financial markets and foster economic growth. However, it added that it can't go at it alone.
"It is important for concerned parties in both the private and government sectors to continue making efforts in their respective roles while making use of accommodative financial conditions," it said.