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 economy is gradually recovering,” BOJ Gov. Kazuo Ueda told reporters after a two-day policy board meeting in Tokyo.

Despite limited developments that would justify a policy shift since December, Japan's central bank nevertheless went ahead to raise interest rates.

Giving explicit advance signals, in addition to making the Bank of Japan feel boxed in, could breach Japanese law stipulating the nine-member board must debate and sign off on rate decisions at each policy meeting.

The return of inflation and wage growth is giving the Bank of Japan room to raise interest rates and declare the end of a long period of stagnation.

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.

In a widely anticipated move, the Bank of Japan on Jan. 24 raised its short-term policy rate to 0.50% from 0.25%. Read more here.

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Japan’s stance is at odds with the loosening trends adopted by the U.S. Federal Reserve and the European Central Bank, which have been cutting rates after raising them to clamp down on inflation.

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The first central bank meetings of 2025 suggest it will be a year in which policymakers go their own way as economic paths diverge, as the United States holds interest rates steady, the euro zone cuts,

The Fed said the job market is “solid,” and noted that the unemployment rate “has stabilized at a low level in recent months.”