The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.

The Bank of Japan (BoJ) has raised its key short-term interest rate by 25 basis points to 0.5%, marking the highest level since 2008.

The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis, underscoring its confidence that rising wages will keep inflation stable around its 2 percent target.

The yen strengthened and Japanese government bond yields rose to fresh multi-year highs on Friday after the Bank of Japan hiked interest rates as expected and raised its inflation forecasts.

The Bank of Japan has raised short-term interest rates by a quarter point, the highest in 17 years, signalling efforts to normalise monetary policy in response to persistent inflation and increasing wages.

Japan's central bank has increased the cost of borrowing to its highest level in 17 years after consumer price rises accelerated in December. The move by the Bank of Japan (BOJ) to raise its short-term policy rate to "around 0.5 per cent" comes just hours after the latest economic data showed prices rose last month at the fastest pace in 16 months.

The 25-basis-point move marks the first rate increase since July and takes rates to their highest since the 2008 global financial crisis.

Governor Kazuo Ueda and his fellow board members lifted the overnight call rate by a quarter-percentage point to 0.5% at the end of a two-day meeting.

Setting rates in Japan will become a delicate balancing act if tariffs materialize.

A look at the day ahead in U.S. and global markets from Mike Dolan The dollar fell to its lowest of the year as the Bank of Japan delivered a long-awaited interest rate rise on Friday, euro business unexpectedly returned to growth and President Donald Trump's latest comments gave China a lift.

Top News Bank of Japan Resumes Hiking Rates as Economy Strengthens The Bank of Japan raised its target for the overnight call rate to 0.5% from 0.25%, making its third rate hike since ending its long-running negative interest-rate policy in March. The bank previously raised the policy rate to 0.25% in July and had kept it at that level since.