The Bank of Japan has today maintained its negative interest rate and tweaked its monetary easing programme as it battles to boost inflation and shore up the pandemic-hit economy.
The adjustment, which marginally expands the fluctuation in long-term rates for 10-year bonds that the bank will accept, is seen as a potential forerunner to further tweaks in policy.
The bank also said it would allow more flexibility in its stock purchases, dropping a target for its intervention in the Tokyo stock market, which has strongly recovered since crashing in spring 2020 as the pandemic began to bite.
The bank's policies were otherwise largely left untouched after its two-day meeting, with an interest rate of -0.1% left intact, as well as an annual ceiling on stock purchases.
Japan's central bank is attempting to tailor its policies to respond to the pandemic and keep on track towards its longstanding goal of 2% inflation, which remains far from sight.
"It is important to strike an appropriate balance between maintaining market functioning and controlling interest rates by allowing interest rates to fluctuate to a certain degree," it said.
"For the time being, the bank will closely monitor the impact of Covid-19 and will not hesitate to take additional easing measures if necessary," it added.
Despite a spike in infections this winter, Japan has seen a comparatively small outbreak overall with around 8,700 deaths, and has avoided imposing the blanket lockdowns seen in other countries.
At its last meeting in January, the Bank of Japan revised its growth outlook upwards for the next two years, even as it warned that the pandemic makes forecasts more difficult.
Analysts said the bank was giving itself slightly more flexibility.
The decision are about paving the way for "more accommodation in the form of rate cuts if necessary, and removing unnecessary restrictions that they had placed on themselves," they said.
"They've also put in provisions to allow themselves to handle rate rises as well. It seems fairly balanced on the whole," they added.