BoJ raises key interest rate for second time in 17 years

TOKYO

The Bank of Japan (BoJ) lifted its main interest rate on Wednesday for just the second time in 17 years in another step away from its long-standing ultra-loose monetary policies.

The Central Bank said in a statement it had set an interest rate of 0.25 percent, up from around zero to 0.1 percent, having ditched its maverick negative rate policy aimed at boosting economic growth in March.

Its decision, announced after a two-day policy meeting, caused the yen to surge briefly before weakening to levels above 153 per dollar.

"Moves to raise wages have been spreading" in Japan while "economic activity and prices have been developing generally in line with the bank's outlook", the BoJ said.

If the economy moves in line with the bank's expectations, officials "will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation," it said.

The BoJ has kept interest rates near or below zero for years, seeking to spur inflation in hopes that would sustain stronger growth for one of the world’s largest economies.

That strategy has proven controversial. It did help to end a prolonged bout of deflation, or falling prices. But since wages failed to keep pace with price increases, consumers have tended to spend less rather than more.

Still, the bank said conditions warranted a change. A weak yen has pushed prices in Japan higher since it makes imported gas, oil and other necessities more expensive. The main index of inflation has exceeded the BOJ’s target of about 2 percent for months.