The Bank of Japan expanded its asset-purchase program for thesecond time in two months, a move that failed to cheer investors asstocks slumped amid mounting evidence that the economy contractedlast quarter.

The fund will increase by 11 trillion yen ($138 billion) to 66trillion yen while a separate credit loan program will stay at 25trillion yen, the bank said in Tokyo, acting hours after datashowed the biggest decline in industrial output since last year'searthquake. The BOJ will also offer unlimited loans to banks toboost credit demand.

The Nikkei 225 Stock Average closed 1 percent lower and the yenstrengthened as faltering exports and waning domestic demandbolster the case for more easing in coming months after the bankforecast it will miss its inflation target in the next two fiscalyears. Economy Minister Seiji Maehara attended his second BOJmeeting today and, in a joint statement with Governor MasaakiShirakawa, said that the government “strongly expects” powerfuleasing until deflation is overcome.