The BOJ also issued a joint statement with the government in which it set 2 percent inflation as its new target, although two of the central bank's nine board members dissented.
As widely expected, the BOJ maintained its overnight call rate target at a range of zero to 0.1 percent by a unanimous vote.
BOJ Governor Masaaki Shirakawa was to hold a news conference on the move later in the day.
The BOJ set a 1 percent inflation target last February, and it expanded monetary stimulus five times in 2012 through an increase in its asset-buying and lending program.
Prime Minister Shinzo Abe, however, has piled pressure on the central bank to aim for 2 percent inflation as a medium-term target and pledge to ease policy aggressively to achieve it.
“The BOJ is moving into new territory,” Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. and a former BOJ official, told Bloomberg. “Two percent inflation will be hard to achieve any time soon, so the BOJ will keep pushing easy policy for quite a long time.”
The central bank aims to achieve its new inflation target at “the earliest possible time.” A forecast released with the announcement showed that the BOJ sees a gain in consumer prices of 0.9 percent for the fiscal year starting April 2014.
After the announcement, five-year government bond yields fell to 0.145 percent, the lowest since June 2003, Bloomberg reported.