The Bank of Japan (BOJ) has left its monetary policy unchanged , despite calls for a tougher stance on deflation.

The move did not surprise analysts, who said it was unlikely the outgoing BOJ governor Masaru Hayami would make any radical change in policy in his final days in the post.

Mr Hayami's five year term ends in March but the prime minister Junichiro Koizumi has not yet revealed his choice for a new governor.

The central bank said board members voted unanimously to target reserves in the bank's current account at between 15 trillion and 20 trillion yen ($127bn -$169.5bn ).

More action needed?

The bank said in a statement on Wednesday:

"Should there be a risk of financial market instability, such as a surge in liquidity demand, the bank will provide more liquidity irrespective of the above target."

The BOJ has provided the money market with excess funds and kept interest rates at virtually zero for the past 22 months under its 'quantitive zero' policy.

But it has been criticised for not doing enough to end deflation.

Just before its latest decision, the prime minister told the Upper House of Parliament:

"We hope that the BOJ will adopt a more effective monetary policy."

'Smokescreen'

Mr Koizumi also said he hoped the new BOJ governor should be a strong fighter against deflation.

The long-running debate over whether the central bank should introduce an inflation target to fight falling prices in Japan continued on Wednesday.

Government pressure is mounting on the BOJ to adopt the target as a way of boosting the economy and cushion the impact of the government attempts to wipe out the banking sector's bad loans.

But a number of economists say the government is using the debate to act as a smokescreen.

"I think the debates are being used as a political tool to divert the public's attention from the slow pace of reforms," said Masaaki Kanno, chief economist at JP Morgan.

"(Politicians) are trying to dump everything in the lap of the BOJ.

"They must discuss ways to really fight deflation. It appears the debates over inflation targeting are done for the sake of argument," added Mr Kanno.