The climb-down by the world's most radical central bank is the latest sign that the monetary experiments since Lehman crisis may have run their course. The authorities have not exhausted their ammunition but are hitting political and legal constraints.

The yen surged 3pc against the US dollar in the biggest one-day move in eight months and equities skidded across Asia after the Bank of Japan (BoJ) failed to take fresh action to stave off deepening deflation, catching markets badly off guard.

Governor Haruhiko Kuroda dashed hopes for 'helicopter money', warning that direct monetary financing of spending would be "illegal".

Mr Kuroda insisted that the BoJ still has plenty of firepower and can at any time push interest rates even deeper into negative territory or boost bond purchases beyond the current $74bn a month.  "If additional easing is needed, we will do so promptly," he said.