The Bank of Japan's policymakers felt that while domestic financial markets were stabilising, they remained sensitive to shocks.

"Upward pressure on interest rates in Japan's money market was moderating, but the market had remained nervous as seen in the continuation of low market liquidity and insufficient arbitrage across markets," the minutes noted.

On the inflation front, the Bank predicted price falls to increase: "The decline in the CPI (excluding fresh food) was expected to continue