The Bank of Japan announced on Tuesday that it will provide 10 trillion yen in short-term loans to commercial banks in an effort to combat the rising yen and growing deflation.

"The Bank has judged that, in supporting the economic recovery from the financial side, it is most effective at present to further spread the strong effects of monetary easing and encourage a further decline in longer-term interest rates in the money market through provision of ample longer-term funds at an extremely low interest rate," the BOJ said in a statement.

The BOJ made the announcement after it called an unscheduled meeting over the current economic situation on Tuesday.

In recent weeks the government has pressured the BOJ to do more to prevent the nation from suffering a double dip recession. Figures last month showed that Japan was likely in deflation, and last week the dollar traded at around 86 yen, its lowest value since 1995.

On Monday, senior figures in the government of the Democratic Party of Japan (DPJ) said that a supplementary budget to support the nation until the end of the fiscal year in March was likely to cost more than the planned 2,7 trillion yen, as the need to stimulate the economy had grown.

The BOJ continued to claim, however, that the economic situation in Japan is picking up.

In recent months, Japan has started to climb out of recession, with increases in gross domestic product, an improvement in business sentiment and growth in the manufacturing sector. However, with prices falling and the strength of the yen, the government has made it clear that it wants to take action to try to maintain the recovery.

(Xinhua News Agency December 2, 2009)