The Japanese yen rallied after the Bank of Japan decided to expand a loan programme for banks to boost lending at the policy review on Wednesday. The main rate was left at 0%.
The USD/JPY fell to 117.80 from 118.60 following the decision. The pair was inching higher over the past three days, moving off the one-month low of 115.85 hit on 16 January.
The BoJ said it will increase the maximum amount of funds that it can provide to each financial institution under the "growth supporting funding facility" to 2 trillion yen from 1 trillion yen now and also expand the maximum amount outstanding to 10 trillion yen from 7 trillion yen.
The bank added it will extend the fund facility to support financial institutions in the disaster areas by a year.
The central bank maintained its massive monetary stimulus of expanding its monetary base by 80 trillion yen, as expected.
The CPI inflation rate will continue at current levels for the time being given the lower crude prices and Japan's economic growth for 2014 would be less than what was estimated in the October outlook, the bank said.
The market is now waiting for the press conference by the bank governor Haruhiko Kuroda at 0630 GMT where he is expected to explain the policy decision.