The Japanese central bank surprised global financial markets on Friday by expanding its quantitative easing (QE) program just two days after the U.S. Federal Reserve ended its QE. Under the program, the Bank of Japan would purchase yearly $721 billion (80 trillion yen) of Japanese bonds using newly printed money.

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As a result of the unexpected move, the Nikkei Stock Average went up 4.8 percent, boosting the index to its highest level in seven years. At the same time, the yen tumbled down to its lowest value vis-à-vis the greenback to pressure central banks elsewhere to wide their own QE programs in a bid to stimulate their respective economies, The New York Times reports.

The Japanese central bank's policy committee voted 5-4 on the QE expansion program that translates into the Bank of Japan buying more than two times the volume of new government-issued bonds, according to a J.P. Morgan report. Haruhiko Kuroda, the central bank governor, described the Friday vote as a critical moment in the Japanese central bank's history since it may risk delaying Tokyo's war against deflation.

On the same day, Kuroda promised to banish the "deflationary mind-set" that he blames for sapping Japanese vitality.

However, some analysts are not convinced that expanding Japan's QE would keep the country's inflation outlook in rein.

Hiromichi Shirakawa, economist of Credit Suisse, warned clients in his note that the new policy could further cause problems in accountability and communications. Robert Waldner, chief fixed income strategist at Invesco Ltd., expressed surprise at the new policy since "Most global pension funds are paring back risks at this point, not adding risk," The Wall Street Journal quoted Waldner.

The announcement comes amid several scandals that hit the Abe-led government and plummeting support for the prime minister's economics program, called Abenomics, over perceptions by Japanese citizens that they do not benefit financially from Abenomics.

The program's "three arrows" of economic changes is made up of monetary stimulus through the central bank policies, infrastructure spending and overhaul in the country's structure. When the PM introduced Abenomics in December 2012, the markets reacted positively, growth was stimulated and Tokyo appeared on the verge of breaking loose from the chains of economic stagnation and plummeting prices.

Ahead of the central bank's announcement, the Bank of Japan's assets were also pared to about 60 percent of the country's economy, but almost double the levels in the U.S. and UK.

Government Pension Investment Fund President Takahiro Mitani stressed that the shift from deflation is the most vital change in Japan's investment climate, pointing out that "We built the previous portfolio in an environment where deflation was continuing for some time, but it is getting clearer from now on the environment is turning to moderate inflation from deflation."

On the same day, Japan also announced amendments to the new allocation guidelines for its pension funds with Japanese and foreign stocks making up 25 percent, up from the previous 12 percent. It pared holdings in domestic bonds from 60 percent to 35 percent but increase overseas bonds to 15 percent from 11 percent.

TagsBank of Japan, quantitative easing