Markets may have punished the Bank of Japan's (BOJ) surprise decision to stand pat on policy at its meeting last week, but it was the right call, Bank of America-Merrill Lynch said.
"The BOJ could have implemented full-fledged easing for one last time, boosted markets, and depleted its ammunition," it noted in a report published Wednesday.
"But global conditions are far from favorable, and if a full-fledged global crisis occurred, could the BOJ respond?"
The central bank decided to hold onto its ammunition, BofA said, calling it a "situation of damned if you do and damned if you don't."
So far, the effects of BOJ easing have been limited. The central bank last week cut its gross domestic product (GDP) growth forecast for 2016-2017 to 1.2 percent, compared with January's forecast for 1.5 percent expansion.
Last week, the BOJ stood pat with its negative interest rate policy on its deposit rate and its planned quantitative easing target of increasing the monetary base by 80 trillion yen ($800 billion) annually. That blindsided markets, which had expected the BOJ to hit the ground with yet another big bazooka of easing measures.