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% target.

Backdrop: Japan had been mired in decades of weak prices and economic stagnation, and even as inflation impacted the globe in the aftermath of the COVID pandemic, BOJ policymakers largely viewed local price pressures as imported from elsewhere.

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.