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Britain's decision to leave the EU was top of the list of uncertainties that prompted the Bank of Japan to increase monetary stimulus.
The Bank announced a modest increase in purchases of exchange-traded funds, but stopped short of significant monetary easing.
It kept the base money target at 80 trillion yen ($775 billion) as well as the pace of purchases for other assets, including Japanese government bonds.
It kept interest rates unchanged at minus 0.1 per cent.
"Against the backdrop of the United Kingdom's vote to leave the European Union and the slowdown in emerging economies, uncertainties surrounding overseas economies have increased and volatile developments have continued in the global financial markets," the Bank said.
Markets were apparently disappointed by the Bank's decision not to pump more cash into the system, with some analysts suggesting that the Bank of England had decided adding to the huge monetary easing programme would not be effective.
The US dollar initially rose to 105.75 yen right after the Bank of Japan announcement but later tumbled to a two and half week low of 102.705 yen.
"The BOJ won’t admit it, but it has reached the limits of quantitative easing and negative rates," said Norio Miyagawa, senior economist at Mizuho Securities.
The UK's vote to leave the UK sparked a yen rally that made it harder for Japanese exporters to make money, adding to pressure for government intervention.
A $266 billion fiscal stimulus package was announced on Wednesday but many were disappointed when monetary easing did not follow, leading to the market reaction.
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“There had been pretty strong hopes for combined measures. There is strong appreciation pressure on the yen now that such hopes have dissipated,” said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
Greg Clark, the UK business secretary, has just returned from Japan, where he reassured companies that are thinking of investing in nuclear energy in the UK.
He met with executives from Nissan on the visit. Many are seeking clarity on the timing of the UK's departure to leave the EU.
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