The Bank of Japan ramped up its vast monetary easing programme Friday -- sending the yen plunging and stocks soaring -- in a surprise move aimed at reviving growth just as the Federal Reserve winds down its own stimulus spree.

Speaking after the central bank wrapped up its latest policy meeting, BoJ chief Haruhiko Kuroda said the fresh measures were crucial to keeping Japan on track in its war on deflation, and hinted more policy moves could follow.

"The Japanese economy is now at a critical moment in the process of getting out of deflation," he told reporters in Tokyo, adding that the BoJ would "not hesitate" to pull the trigger on more easing if necessary.

Policymakers said they would inflate the central bank's asset-buying stimulus plan by as much as 20 trillion yen ($182 billion), bringing it to an eye-popping 80 trillion yen annually.

The BoJ also slashed its economic growth forecast by half, and trimmed consumer price expectations as a much-touted inflation target looked increasingly out of reach while Tokyo's bid to kickstart the economy stalls.

The yen dived below 111 against the dollar, levels not seen since January 2008, following the announcement while Tokyo's Nikkei 225 stock index soared more than five percent to a seven-year high.

The move is the first since Japan's central bank launched its huge bond-buying scheme in April last year as a cornerstone of Tokyo's wider plan to jumpstart the world's number three economy.

Friday's decision throws into focus the sharp contrast of fortunes for the US and Japanese economies after the Federal Reserve on Wednesday brought an end to six years of bond-buying and considers an interest rate hike.

"Just when the Fed takes the punch bowl off the table, the BoJ arrives with a case of sake," said Jonathan Sudaria, a broker at London Capital Group.

UK-based CMC Markets added that the BoJ's move was "filling the void left by the US central bank".

- 'Deflationary mindset' -

On Thursday the Commerce Department said the US economy expanded an annualised 3.5 percent in July-September, beating expectations of 3.0 percent.

Japan's economy, on the other hand, contracted 7.1 percent on an annualised basis in the second quarter -- its steepest quarterly drop since the 2011 quake-tsunami disaster -- as it was hit by a sales tax hike in April.

That has stoked fears about another downturn in July-September, which would technically put the country in recession.

A BoJ statement said the decision on Friday passed by a narrow 5-4 majority vote.

The bank acknowledged that the levy hike had put its target of 2.0 percent inflation by sometime next year in trouble, and said that had prompted Friday's decision.

"Japan's economy has continued to recover moderately as a trend and is expected to continue growing at a pace above its potential," the BoJ said in a statement.

"However, on the price front, somewhat weak developments in demand following the consumption tax hike and a substantial decline in crude oil prices have been exerting downward pressure recently.

"If the current downward pressure on prices remains, albeit in the short term, there is a risk that conversion of deflationary mindset, which has so far been progressing steadily, might be delayed."

While falling prices may sound like a good thing, they create an incentive for consumers to put off buying goods in the hopes of getting them cheaper down the road, which in turn hurts producers and their expansion plans.

- Sooner than expected -

The BoJ's easing move came after official data earlier Friday showed September inflation slowed and household spending slumped as consumers tighten their belts.

"It always looked likely that the Bank of Japan would be forced to step up its pace of easing but the change of tack has come sooner than the market (or we) had expected," Marcel Thieliant from Capital Economics said in a note.

"Given the recent downward trend in inflation, the Bank could well end up increasing its asset purchases again next year."

Earlier this week, the BoJ's deputy governor Kikuo Iwata said the two-year timeline was not as rigid as Japan's always-on-time train services.

"Monetary policy is aimed at influencing people's behaviour," he told a parliamentary committee.

"It can't be like a train schedule."

Japanese media reported Friday that the government was considering an extra stimulus package of 3.0-4.0 trillion yen to counter the downturn.

After its meeting, the BoJ slashed its economic growth outlook to 0.5 percent in the year to March, well down from a 1.0 percent growth forecast in July, citing lacklustre exports and slack consumer spending.

It also trimmed its fiscal year inflation outlook to 1.2 percent from 1.3 percent, and to 1.7 percent from 1.9 percent in fiscal 2015.