Bank of Japan announces negative interest rates
A man holding an umbrella walks in front of the Bank of Japan headquarters in Tokyo, Japan, January 29, 2016. The Bank of Japan ramped up its aggressive stimulus campaign on Friday, adding negative interest rates on central banks deposits to its massive asset-buying program, stunning financial markets that expected no action or a moderate increase in asset purchases. Reuters

The Bank of Japan (BoJ) adopted negative interest rates on excess bank deposits with the central bank, dealing shock to financial markets and Japanese domestic savers on Friday.

The BoJ's monetary policy committee voted narrowly (5-4) to adopt the negative interest rates, an unprecedented move aimed at boosting spending and keeping deflationary sentiments at bay.

Making the first change to the rate regime in five years, the Boj said the benchmark rate is revised to -0.1 per cent from a previous level of 0.1 per cent.

The BoJ, which announced the decision after a two-day meeting, did not make any changes to its massive quantitative easing programme, keeping it at 80 trillion yen of assets a year.

Analysts had expected BoJ to announce a slight increase in money printing or make no changes at all, but the move to impose negative interest rate was surprisingly accompanied by a promise to "cut the interest rate further into negative territory if judged as necessary."

Inflation target 

The BoJ said the Japanese economy "has continued to recover moderately" but said it wanted to reach the inflation target of 2 percent as soon as possible, having delayed the time frame several times in the past.

Asian shares rose and the yen dropped following the BoJ rate decision. The Nikkei stock average rose 1.1 percent in the post lunch session.