* BOJ keeps base money target intact as widely expected * Maintains view Japan's economy recovering moderately * BOJ expands special loan facilities, extends deadline * Kuroda says loan schemes will enhance QE transmission By Leika Kihara and Stanley White TOKYO, Feb 18 The Bank of Japan maintained its expansionary monetary policy on Tuesday and extended special loan programs to help buoy economic growth, signalling its resolve to keep the positive mood generated by premier Shinzo Abe's reflationary policies from fading. The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away. But the Nikkei stock average surged 3.1 percent and the yen sagged on its decision to extend special loan facilities by one year and double the size of funds available to banks. BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash. "We have an engine with big horsepower, so it makes sense to have stronger tires," he told reporters after the decision. While some investors viewed the loan program expansion as a policy signal the BOJ may take a more accommodative stance if necessary, Masashi Murata, senior currency strategist at Brown Brothers Harriman, cautioned that the reaction in the Japanese government bond market suggested this was not the case. "Bank shares drove the Nikkei, which drove the yen, but JGBs did not react much," he said. As widely expected, the BOJ on Tuesday maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589-$687 billion). The central bank also stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world's third-largest economy can weather the pain from a sales tax increase in April without additional stimulus. "The BOJ already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo. BULLISH TONE INTACT? The BOJ has stood pat on policy since launching an intense burst of stimulus last April, when it pledged to accelerate inflation to 2 percent in roughly two years via aggressive asset purchases in a country mired in deflation for 15 years. Monday's weaker-than-expected fourth-quarter GDP has dashed hopes that a rush in household spending ahead of the April tax hike would cushion the pain from sluggish export growth. While the BOJ is in no mood to act immediately, market pressure for further stimulus may heighten in coming months if there is more evidence that personal consumption is losing momentum, some analysts say. Kuroda, however, remained sanguine, saying he saw no threat to the bank's rosy projections with overseas demand seen picking up and rising income underpinning consumption. "If risks materialise, we will not hesitate adjusting policy, but for now Japan's economy is on track and moving in line with our forecasts," he said. As expected, the BOJ extended three special loan facilities by one year from their scheduled expiry in March. Of the three, it doubled funds available to banks under two facilities -- one that encourages banks to funnel money to industries with growth potential and another that offers cheap funds to banks that boost lending. Both give banks access to funds for four years at a fixed rate of 0.1 percent. But analysts doubt how much the expansion will do to boost lending, which has increased only moderately despite the BOJ's aggressive stimulus on sluggish corporate demand for funds. Of the combined 21.5 trillion yen that had already been set aside under the three facilities, less than 9 trillion yen has been tapped so far. Kuroda acknowledged that the BOJ was counting somewhat on the psychological effect by boosting the lending facilities. "We attempt to strengthen the incentive for banks to tap these facilities," he said. "We've included a strong message of support for these programs."