A pedestrian walks in front of the Bank of Japan headquarters (rear) in Tokyo, Dec. 20, 2013. Kazuhiro Nogi/AFP/Getty Images

The Bank of Japan surprised markets by cutting its benchmark interest rate below zero — introducing so-called negative interest rates — to try to boost growth that BOJ Governor Haruhiko Kuroda and Prime Minister Shinzo Abe have targeted but failed to achieve. The move comes two years after the European Central Bank went into negative territory and is in the opposite direction of the U.S. Federal Reserve, which raised rates last month for the first time since the global financial crisis.

The BOJ said it was cutting the rate it pays banks to negative 0.1 percent — meaning it is the banks that will pay the BOJ, which is meant to encourage them to boost lending to fuel growth. "It will cut the interest rate further into negative territory if judged as necessary," the bank said in its statement Friday.

Investors applauded the move, sending Japan's Nikkei 225 up 3.2 percent, the Shanghai Composite Index up 2.9 percent, Hong Kong's Hang Seng Index up 2 percent and Singapore's STI up 1.5 percent.

The BOJ said it took this step to boost inflation to 2 percent "at the earliest possible time." Some observers had speculated the bank would explicitly delay that goal from the current target of March next year. The bank needs to fuel inflation — it is coming from deflation — to give businesses and consumers more incentive to spend sooner rather than later. Inflation was 0.1 percent last year.

The BOJ also maintained its 80 trillion yen ($675 billion) per year program of increasing money supply by buying bonds, and investing in exchange traded funds and real estate investment trusts. That means the bank is shifting from so-called quantitative easing back to actually easing interest rates, which may be a sign they believe buying Japan Government Bonds (JGBs) hasn't been or will no longer be very effective or affordable.

Bank of Japan Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo, Japan, Dec. 18, 2015. Reuters

"I think this is a regime change and the BOJ's main policy tool is now negative interest rates," said Daiju Aoki, an economist at UBS Securities in Tokyo, Reuters reported. "This shows that the ability to buy more JGBs is limited."

"Abenomics" and Kuroda's monetary policy had mixed results even before falling oil prices put more downward pressure on inflation. The BOJ acknowledged that in its latest statement.

"Recently, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy," the bank said in the statement.

While stocks rose and the yen fell — which makes exports more competitive and makes imports more expensive, stoking inflation — it's not clear negative rates will succeed where quantitative easing failed. Even the European Central Bank last week said it may adjust monetary policy sooner rather than later amid weaker than expected growth.

“We don’t know this negative rate policy will be good for the economy in the end,” said Daisuke Karakama, an economist at Mizuho Bank in Tokyo, Bloomberg reported.