Bank of Japan said on Tuesday that it has decided to maintain aggressive monetary easing measures to prop up the world’s third-largest economy and overcome chronic deflation.

The central bank said it would extend its special loan programmes for one year to encourage banks to spur lending to businesses with growth potential and support the economic recovery.

The size of the fund would be doubled to ¥7 trillion ($68 billion) from ¥3.5 trillion.

The decision helped the benchmark Nikkei 225 Stock Average surge 3.1 per cent on Tuesday.

The announcement came on the heels of weaker-than-estimated domestic growth data. The Government had reported on Monday that Japan’s economy grew at an annual rate of 1.0 per cent in the October-December period, less than expected amid weak exports.

Despite the disappointing figures, the bank said in a statement that “Japan’s economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed.”

Economists predicted consumer spending would continue to rise in the current quarter, but a sharp slowdown is expected after the sales tax hike in April, when the Japanese Government will raise the current 5 per cent rate to 8 per cent.

Prime Minister Shinzo Abe and the bank’s governor Haruhiko Kuroda vowed to pull the country’s economy out of 15 years of deflation.

In April, the central bank had introduced its monetary-easing policy with the aim of achieving 2 per cent inflation within about 2 years. Consumer prices climbed 0.4 per cent in 2013 for the first rise in five years amid aggressive monetary easing.

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