The Bank of Japan said Tuesday it increased its asset buying program by $130 billion and set an inflation target of one percent to stimulate economic growth and combat deflation.

Amid continued high uncertainty surrounding economic developments both at home and abroad, the Bank has judged it necessary to further support recent positive developments from the financial side and better ensure the economy's return to a moderate recovery path, it said in a statement.

For this purpose, the Bank has decided to clarify its monetary policy stance and to further enhance monetary easing at today's meeting in order to overcome deflation and achieve sustainable growth with price stability.

It noted that the outlook for Japan's economy had high uncertainty in the face of the Eurozone crisis, the supply and demand of electricity and with the yen's appreciation. The country's declining growth and aging population put additional pressure on the economy.

Japan's economy decreased by an annualized rate of 2.3 percent last quarter, the government said earlier this week.

Politicians, many of whom have criticized the bank's inaction on monetary stimulus after the U.S. Federal Reserve set a two percent inflation target in January, praised the nation's central bank.

We welcome the Bank of Japan's policy measures, which constitute aggressive steps to beat deflation, Japan's finance minister, Jun Azumi, said after the decision. We hope the bank's bold monetary easing will boost the economy.

The yen was down 0.62 percent to 1.28 U.S. cents in Tuesday morning trading