The central bank intends that this funding will encourage the financial institutions to lend greater amounts to private businesses, with the hope that this will stimulate economic growth.
Interest rates have also been frozen by the bank at 0.1 per cent â a figure that has been in place since the end of 2008, reports BBC News.
Chiwoong Lee, economist at Goldman Sachs, has questioned how well the Bank of Japan's loan scheme will work.
"We see little impact at this stage due to a lack of demand for funds," the analyst said.
Earlier this week, new Japanese prime minister Naoto Kan warned that the country's economy is in danger unless the government takes serious measures to tackle its budget deficit and large debts.
He stated that a full reform of the current tax system is "unavoidable".
By Asim Shah