Tokyo - Japan's central bank on Wednesday unveiled a surprise overhaul of monetary policy, promising to redouble attempts to fuel inflation and kickstart the torpid economy.
After a hotly anticipated meeting, the Bank of Japan said it would set a target for 10-year government bond yields to try to push them higher, while delaying a further cut in interest rates into negative territory.
The bank also loosened its annual asset-buying target - a key feature of its more than three-year-old policy - saying the target could instead fluctuate to give it flexibility while focusing on keeping bond yields steady.
In response, the benchmark 10-year bond jumped into positive territory for the first time since March but quickly sank bank.
The bank also repeated pledges to continue monetary easing as needed until inflation reaches and stabilises at its 2.0 per cent target, which was first unveiled over three years ago.
Prices are still nowhere near that level. But BoJ chief Haruhiko Kuroda waved off suggestions Wednesday's announcement marked any rollback.
"(This) doesn't mean we've abandoned the previous policy," he told reporters in Tokyo, adding that the Boj's inflation goal "has not changed a bit".
The announcement - hours before the US Federal Reserve ends its latest meeting - appeared aimed at critics of the BoJ, including banks and insurance companies that have been hit by its negative rate policy.
Negative rates are meant to encourage lending to people and businesses by effectively charging banks to keep excess reserves in the BoJ's vaults. But commercial lenders have complained they are eating into profits.
The central bank also said it would lift controls on maturities of the bonds it buys under the huge asset-purchase plan - there are concerns it is running out of government bonds that it can buy, sparking volatility in debt markets.
Bank stocks rallied in response to the BoJ's announcement, with Tokyo's Nikkei 225 index surging nearly two per cent by the close.
The yen plunged - good news for exporters - after the announcement. Easing measures tend to depress the yen as it suggests more of the currency will be floating around the financial system.
The dollar jumped to 102.64 yen from around 101.66 yen earlier Wednesday, but it quickly settled back as investors digested the complicated and relatively technical changes.
Wednesday's announcement came as the bank released an unprecedented report card on its own policies, which are a cornerstone of Prime Minister Shinzo Abe's economic growth drive dubbed Abenomics.
In its review, the bank blamed its failure to hit its inflation target on a drop in oil prices, a sales tax rise in 2014 that dented spending and trouble in overseas economies.
Still, the bank said its policies have "transformed peoples' perception of inflation and... led to a rise in inflation expectations".
Some were sceptical about the idea of the BoJ rating itself, as doubts grow about the likelihood of Abenomics reviving the economy.
"A review done by the people concerned tends to be rather lenient and may not be objective," Credit Suisse analyst Hiromichi Shirakawa said before the report.
Since its launch in early 2013, Abenomics - a mixture of big government spending, monetary easing and promises to cut red tape - has largely failed to deliver.
Japan's economy contracted in the last three months of 2015, before bouncing back in January-March with a 0.5 per cent rise on-quarter and then a 0.2 per cent expansion in April-June.
Tokyo recently announced a 28 trillion yen package aimed at kickstarting growth, after Britain's June vote to quit the European Union sent financial markets into a tailspin and sparked a rally in the yen, which is hurting corporate profits.
Before markets opened Wednesday, Japan published weak trade figures that underlined the struggles facing Abe and BoJ chief Kuroda.
"I think the positive reaction (to the BoJ decision) will be short-lived," said Daisuke Uno, chief market strategist at Sumitomo Mitsui Bank.