Bank says it expects inflation in counry likely to be around 2.5% for fiscal 2025.

The Bank of Japan on Friday raised its policy interest rate 25 basis points from 0.25% to 0.5%, putting it at its highest level since October 2008.

“Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions,” the bank said in a statement.

The bank said it expects consumer inflation to be around 2.5% for fiscal 2025 due to higher import prices stemming from the yen’s depreciation.

It added: “Global financial and capital markets have been stable on the whole, while attention has been drawn to various uncertainties.”

Despite hikes by major banks, the Bank of Japan had kept its rate at minus 0.1% since 2015 but decided to raise it to 0.1% last March and hiked it to 0.25% in July.