The BoJ will expand annual JGB purchases to 80 trillion yen, from 50 trillion yen currently, and extend the duration of bonds it holds to about 7-10 years. It will also triple its purchases of ETFs to 3 trillion yen from 1 trillion yen and Japan real estate investment trusts to 90 billion from 30 billion.
In its policy statement, the central bank pledged to maintain easing as long as necessary to achieve stable 2 percent inflation.
"The key part of this announcement is they are trying to drive all doubt out of the market about the level of commitment to achieving the desired goal," said Ed Rogers, chief executive officer of Tokyo-based Rogers Investment Advisors.
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Data released earlier Friday showed consumer inflation slowing further in September. Adjusted for the April tax hike, core consumer prices rose 1 percent on year, slower than the 1.1 percent rise in August and well below the 2 percent target the central bank aims to achieve by mid-2015.
Today's action proves that Governor Haruhiko Kuroda is going to do whatever it takes to create the environment needed for success, Rogers added.
Will the BOJ's second bazooka work?
In its twice-annual economic outlook report released shortly after the monetary policy decision, the BoJ lowered its real gross domestic product (GDP) growth target to 0.5 percent for financial year ending March 2015, from a 1.0 percent projection in July.
Core CPI projections excluding the effects of the sales tax hike were also lowered to 1.2 percent for financial year 2014/2015 from an earlier target of 1.3 percent, and to 1.7 percent from 1.9 percent for financial year 2015/2016.
Japan watchers are hopeful the fresh stimulus will put the economy on a more stable footing.
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The BoJ's accommodative stance will be positive for stocks, which will help create a wealth effect and boost consumption, said economists.
It will also add fuel to dollar-yen trade – weakening the yen – which is positive for Japan's export sector, they said.
The U.S. dollar rose more than 2 percent against the yen on Friday to an intraday high around 111, its highest level since 2008.
"Companies have been reluctant to increase production as they weren't sure if the weak yen was here to stay. This will improve the environment for companies to invest," said Martin Schulz, senior economist at Fujitsu Research Institute.
Second sales tax looms
With the BoJ giving the economy a fresh shot in the arm, this increases the likelihood that the government will follow through with a second tax hike - to 10 percent from 8 percent - next year, say economists.
"The government can make a case because the BoJ is being more expansionary," said Schulz.
Japan's Economic Minister Akira Amari on Friday said the "BoJ decision on easing and the government decision on the next tax hike are related but separate."
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Following the policy decision, Kuroda said he expects the government to continue taking steps towards fiscal consolidation, adding that "confidence in fiscal policy is important to any central bank."
Meanwhile, Japan's Economic Minister Akira Amari sought to make clear that central bank and government policy are distinct.
"The BoJ's decision on easing and the government's decision on the next tax hike are related but separate," he said. The government is expected to make a decision on whether to go ahead with the second tax increase by December.