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.

Japan's central bank has raised its key interest rate to about 0.5% from 0.25%, noting that inflation is holding at a desirable target level.

The Bank of Japan raised its key policy rate to the highest level since 2008 and took a more bullish view on the strength of inflation.The rate hike followed a report showing consumer prices excluding fresh food rising at a faster pace of 3%,

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.

In a well-trailed move, the Bank of Japan on Friday raised the policy rate by 0.25 percentage points, taking it to 0.5 per cent — its highest level in nearly two decades.

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 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.

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 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,

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, reinforcing views it will push rates up again.