The Bank of Japan has announced a modest expansion of its monetary easing programme, blaming Britain’s decision to leave the European Union as the biggest uncertainty facing world markets.

The central bank acknowledged government pressure for more action to drive the yen lower and help Japan’s legion of exporters, but refrained from upping its bond purchases or cutting interest rates.

Instead the bank sanctioned an increase in purchases of exchange-traded funds as it attempted to accelerate inflation towards its 2% target.

The moves disappointed the markets, which had expected another big influx of liquidity. The Nikkei stock average plunged more than 1% on the news before recovering as traders digested the impact of the measures.

However, the yen rose 2% against the US dollar, which will frustrate government attempts to devalue the inflexibly high currency.