In a 5-4 vote the bank’s board imposed a 0.1% fee on deposits left with the Bank of Japan (BoJ) – in effect a negative interest rate.
The move which follows the similarly aggressive precedent set by the European Central Bank in June 2014 is designed to encourage commercial banks to use excess reserves they keep with the central bank to lend to businesses.
The surprise decision came just days after the bank’s governor Haruhiko Kuroda suggested he had dismissed any drastic easing measures to boost business confidence.
On Friday the bank said it had not ruled out a further cut.
‘The BoJ will cut the interest rate further into negative territory if judged as necessary’ it said in a statement.
It said the move was intended to lessen the risk to Japanese business confidence from turbulence in the global economy a week after data showed the Chinese economy had grown at its slowest pace for a quarter of a century in 2015.