Tokyo, Japan (CNN) -- The Bank of Japan will allocate 10 trillion yen ($115 billion) into short-term, low-interest loans to stem deflation and bring down the value of the yen, the bank announced on Tuesday.
The bank, making the announcement on its Web site, said it kept the overnight lending rate at 0.1 percent.
Last week, Japan's yen hit a 14-year high. But on Tuesday the yen fell 0.7 percent to 87 yen per dollar, the biggest drop in a month, on news of the bank action. The Nikkei 225 grew 2.4 percent after dropping nearly 7 percent last month.
The strong yen has been a problem for export-driven Japan, making it one of the economies hardest hit by the global downturn.
Video: Japan tackles deflation
Video: Japan's deflation problem
"On the financial front, corporate finance, with some lingering severity, has continued to show signs of improvement. However, there is risk that recent international financial developments and foreign exchange market instability might pose adverse effects on economic activity through impacts on business sentiment," the bank board said in a statement.
"In order for Japan's economy to overcome deflation and return to a sustainable growth path with price stability, the Bank will continue to do its utmost as a central bank," the statement said.
