Japanese stocks fell off a cliff

Japan's central bank has surprised the market again.

The Bank of Japan said it would hold off on more stimulus measures to study the effect of negative rates on the real economy, confounding market expectations of more stimulus.

The central bank, led by Haruhiko Kuroda, postponed its target to hit 2% inflation until 2017, showing caution around future rate cuts.

Markets fell immediately. The Nikkei dropped 3.61%.

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Meanwhile the yen strengthened more than 2% against the dollar, a big move in such a short time. The yen hit 108.79 to the dollar, down from more than 111.

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Earlier this year, Kuroda surprised the market with additional easing measures, pushing interest rates into negative territory and expanding the asset purchase program.

This time, the central bank left its minus 0.1% deposit rate and 80 trillion yen asset purchase program unchanged, which was enough to shock the markets again.