In a bid to improve the corporate outlook and fight falling prices, the policy-setting panel of the Bank of Japan decided Tuesday to further ease its grip on credit and boost liquidity by 1 trillion yen.

Against a backdrop of mounting political pressure to loosen the already ultra-easy monetary policy, the BOJ notched up target reserves held at the central bank from 5 trillion yen to 6 trillion yen to bolster liquidity in the banking system. To achieve this, it further increased its outright purchase of long-term government bonds from 400 billion yen to 600 billion yen per month.

In explaining the decision, BOJ Gov. Masaru Hayami pointed to the rapid slowdown in the global economy, declines in production and concerns about how the recent tumbles in stock prices would affect banks' interim reports. The new policy would further support and encourage the government's commitment to structural reform, Hayami said.