The Bank of Japan (BoJ) caught markets off guard on Friday, when it announced steps to further bolster its aggressive stimulus program in an effort to reverse the downward trend of the world's third-largest economy.

Wrapping up their last meeting of the year, central bank policymakers agreed to fine-tune their vast bond buying scheme, setting aside an additional 300 billion yen (2.3 billion euro, $2.5 billion) to boost the bank's holdings in companies dedicated to capital investment and hiring.

"Under this new program, the bank will purchase ETFs (exchange-traded funds) composed of stocks issued by firms that are proactively making investment in physical and human capital," the central bank said in a post-meeting statement.

ETFs hold assets, including shares and bonds, that trade on stock exchanges.

The BoJ is already pumping some 3 trillion yen into the economy each year, buying up government bonds and other assets.

The unexpected move sent the Nikkei stock index on a brief surge, peaking at more than 2 percent up before nosediving, ending the day down 1.9 percent.

The BoJ's announcement comes just two days after the US Federal Reserve raised its key interest rate for the first time in nearly a decade, signaling confidence in the recovery of the American economy. However Japan's central bank is still struggling to re-ignite growth after years of deflation and stagnation.

Cornerstone of Abenomics

The central bank's stimulus, launched more than two years ago, is a cornerstone of Prime Minister Shinzo Abe's attempt to kickstart the long-lumbering economy, a policy known as Abenomics.

So far the drive to defeat years of growth-sapping deflation has had a limited impact on the wider Japanese economy, despite sharply weakening the yen in a boost for exporters and stoking a stock market rally.

The BoJ's move to hike its holdings in firms that invest in new equipment and hire more workers comes as the Japanese government is struggling to convince companies to lift wages and add new jobs.

But markets clearly were not convinced that Friday's measures will do what it takes to turn the Japanese economy around.

"The market took it as a surprise, but the impact of the measures is unclear," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

Describing the 300-billion-yen boost as "miniscule," Marcel Thieliant, an analyst at Capital Economics, said: "These are helpful measures, but they won't make much difference in practice."

tko/pad (AFP, AP)