PARIS, France ? The yen gained ground Monday against the dollar and the euro despite action by the Bank of Japan to stem the rise of the currency.

The dollar in mid-morning deals was trading at 84.85 yen, down from 85.19 on Friday, while the euro had slipped to 107.97 yen from 108.65.

The single currency also fell to 1.2724 dollars from 1.2751 on Friday.

The rise in yen defied an announcement by the Bank of Japan that it would extend a multi-billion-dollar loan programme.

The decision came after an emergency meeting called in response to strong pressure from officials to curb the yen's rise and support an economy mired in deflation. The unit hit a 15-year high against the dollar last week.

In its second loan expansion since March, the bank said it would offer 10 trillion yen (118 billion dollars) in six-month low interest loans in addition to 20 trillion yen from December's three-month loan scheme.

Domestic financial institutions will therefore be able to borrow a total of 30 trillion yen from the central bank for maximum of six months against pooled collateral, at the rate of 0.1 percent.

The move would help lower interest rates in the market place with a view to easing the yen's strength, said the bank, which left its key rate unchanged at 0.1 percent.

The rising yen is seen as a threat to growth, raising prices on Japanese exports and reducing the competitiveness of Japanese industry.

Markets nonetheless took a dim view of the widely expected central bank steps, with the yen strengthening to below 85 against the dollar and the Nikkei index paring back earlier three percent gains to close up 1.76 percent.

The economic impact of the decision will be "close to zero," Macquarie Bank economist Richard Jerram told Dow Jones Newswires. "It's largely a charade."

The euro early Monday was changing hands at 1.2724 dollars against 1.2751 dollars on Friday, at 107.91 yen (108.65, 0.8179 pounds (0.8213) and 1.3095 Swiss francs (1.3113).

The dollar stood at 84.85 yen (85.19) and 1.0290 Swiss francs (1.0278).

The pound was at 1.5570 dollars (1.5517).