The financial markets may have approved of the Bank of Japan's (BOJ) paradigm shift on Wednesday, sending shares higher and the yen lower, but analysts called it a damp squib.
At its closely watched policy meeting on Wednesday, the BOJ said it would make controlling the yield curve the driver of its new policy framework, using a combination of its policy interest rate and government bond purchases.
Expectations headed into the meeting were more uncertain than usual, particularly as the central bank had said it would conduct a comprehensive review of the effectiveness of its policies as it aimed to reach its long-delayed 2 percent inflation target.
Financial markets clearly approved, with the Nikkei 225 index finishing up nearly 2 percent, while the Topix index tacked on around 2.7 percent. The Japanese currency weakened, with the dollar fetching as much as 102.78 yen after the decision, compared with as little as 101.09 yen earlier in the session.
Analysts, however, broadly considered the BOJ's performance just a disappointing change of scenery.
Patrick Bennett, a foreign-exchange strategist at CIBC, said in a note:
The conclusion to the comprehensive review is underwhelming ... Today's actions can't manufacture inflation, and never could. A steeper yield curve might be seen as a boon to banks and funds, but without growth and/or inflation; investors, be they pension or life companies or similar, will simply buy the back end and drive the curve flat or flatter again. The problem is not the price of money but the demand for it.
Eisuke Sakakibara, who is currently a professor at Aoyama Gakuin University and is known as "Mr. Yen" for his efforts to influence the yen's exchange rate through verbal and official intervention in the currency markets as a former Vice Finance Minister of Japan in the late 1990s, told CNBC's "Capital Connection" on Wednesday:
"The market was expecting another aggressive easing of the monetary policy. [BOJ Governor Haruhiko Kuroda] didn't respond to that," Sakakibara said. "It's a little disappointment for the market, I think, but it really tells that Governor Kuroda doesn't have any sense of crisis or any sense of urgency. He's satisfied with status quo and he'll continue on his current path."
But Sakakibara also questioned whether the market was viewing the BOJ's 2 percent inflation target with the correct lens.
"My view is that Governor Kuroda never thought that 2 percent target could be achieved. But as long as that target is there, he could continue to ease monetary policy, so he didn't abandon that target in order to continue aggressive easing of the monetary policy," he said. "Nobody really believed that target could be achieved … 1 percent is enough."
Kit Juckes, global fixed income strategist at Societe Generale, said in a note Wednesday:
"'Quantitative and Qualitative Monetary easing with Yield Curve Control' certainly isn't a snappy title for a policy, but maybe when you're scraping the bottom of the jam jar in a desperate search for something to put on a piece of toast at breakfast, a fancy title helps disguise the lack of sustenance."
Masaaki Kanno, an economist at JPMorgan, said in a note titled "The first impression: The BOJ disappointed" on Wednesday:
"We do think that the inflation-overshooting commitment would not have any significant impact on the inflation expectation, and that it is not so much different from the BOJ's previous commitment," the note said.
"Today's decision suggested that the BOJ is not so serious to achieve 2 percent inflation rate so soon," it said. "The BOJ appears to be more worried about the limit of the tools and the negative impact of the NIRP [negative interest rate policy], although the bank will never accept this at least officially."
Marcel Thieliant, a senior Japan economist at Capital Economics, said in a note on Wednesday:
"The bank pledged to overshoot the [inflation] target. This is ironic, as the bank is a long way from hitting the target in the first place and has therefore few practical implications."
Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note Wednesday:
"Today's move doesn't compare to the huge QE and monetary base announcements of a few years ago and I am a bit sceptical that without the adoption of 'helicopter money,' i.e. the direct financing of fiscal stimulus via BOJ easing, the BOJ may continue to struggle to meet its inflation target."
Bill Blain, head of capital markets and alternative assets at Mint Partners, said in a note Wednesday:
"Is it just me thinking that's a recipe for banking disaster… It's a fairly dramatic deep-dive focus from the BOJ – digging even deeper into what I always thought was the function of markets. The BOJ seeks to impose its vision on the yield curve – which I mistakenly believed was a factor of inflationary expectations and market confidence, rather than government/central banking fiat."
Not everyone was disappointed.
Homin Lee, regional economist for Asia at Lombard Odier, said in a note Wednesday:
"We are positively surprised by the BOJ's new policy framework adjustments despite the bank's apparent restraint on the key dimensions of the easing effort (JGB purchase amount, negative interest rate, and private sector assets)."
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—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1