A joint statement issued by the government and the Bank of Japan on Tuesday stated that the central bank will adopt a 2 percent inflation target, discarding its rather loose 1 percent price-stability goal that it adopted last February. The BOJ will also start buying about ¥13 trillion in financial assets, including some ¥2 trillion in government bonds, every month as long as necessary starting in January 2014.

This represents a drastic change in the BOJ's approach. The BOJ has been reluctant to adopt such an inflation target in view of Japan's economic condition over the past two decades. It also means that it has bowed to some extent to government pressure.

In the campaign for the Dec. 16 Lower House election, the Liberal Democratic Party had called for the adoption of a 2 percent inflation target, and Prime Minister Shinzo Abe has called for unlimited monetary easing to pull the Japanese economy out of its long-term state of deflation.