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 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.

Tokyo, Jan 24 (AP) The Bank of Japan raised its key interest rate to about 0.5% from 0.25% Friday, noting that inflation is holding at a desirable target level. The decision by the central bank came at the end of a two-day policy board meeting in Tokyo.

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.

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.

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.

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 BOJ concludes its two-day policy meeting later in the day and markets have fully priced in a 25-basis-point hike, with comments from BOJ officials in recent times also hinting at such a move. Ahead of the decision, the yen was little changed at 156.11 per dollar, languishing near a one-week low hit in the previous session.

The Bank of Japan delivered a widely expected 25 basis point hike to its key lending rate on Friday, bringing the overnight call rate to the highest since 2008 and putting pressure on the dollar. The ICE Dollar Index slipped 0.

U.S. stocks are hanging near their all-time high on Friday as they head for the close of a second straight winning week. The S&P 500 was virtually flat in midday trading, a day after setting a record.

In the eyes of Japanese economic policymakers, there have been few surprises from the nearly week-old Trump administration. That, in part, gave them confidence to raise interest rates again Friday. Why it matters: The Bank of Japan had held off hiking rates late last year,