The Bank of Japan raised interest rates on Friday to their highest levels since the 2008 financial crisis, continuing a difficult march away from free money as the economy shows signs of recovery and inflation readings come in above target.

At a two-day policy meeting that ended Friday, the central bank voted to raise its short-term policy rate to 0.5% from 0.25%, in line with the consensus estimates of analysts and economists. The move is also in line with reports in the local press on Thursday evening, suggesting that the central bank continues to leak its rate decisions ahead of formal announcements.

The 25-basis-point move marks the first rate increase since July and takes rates to their highest level in 17 years.

Considering BOJ Gov. Kazuo Ueda's dovish signals following the December policy meeting, some analysts had been predicting that the BOJ might wait until March to raise rates. A January increase became more favored by the consensus in recent weeks as the BOJ indicated that a move was in the offing.

Concerns about the first few days of the administration of U.S. President Donald Trump hung over the rate decision, but markets have been strong despite continued talk of tariffs and retaliation, allowing the central bank to tighten monetary policy without the risk of causing turmoil.

“We have assessed that the international financial capital markets have remained relatively calm overall after President Trump has taken office and provided big pictures for policy,” Ueda said during a news conference after the policy meeting on Friday.

BOJ Deputy Gov. Ryozo Himino said last week that the bank would make a decision by comprehensively analyzing the overall economic situation, adding that the U.S. economy is “one major factor.”

“I believe the biggest factor was that markets have remained stable after the inauguration of President Trump,” said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting.

It’s possible that markets will be more volatile in March, as tariffs might be imposed by then and the U.S. president might have made some unexpected moves, he added.

“In that sense, the BOJ probably thought that now is the right time given that stock prices are quite high and the yen is quite weak,” Kobayashi said.

The yen strengthened into the ¥155 range Friday from above ¥156 on Thursday.

Another important factor, which the BOJ has repeatedly mentioned, is the need for confidence in wage-rise momentum going into annual spring-wage negotiations. Ueda said since many companies appear set to offer solid wage increases, the bank predicts that wage momentum will be maintained this year.

On Friday, the BOJ also revised its inflation outlook that is updated quarterly, saying that inflation will be stickier than expected due to the weak yen.

It projects that consumer prices, excluding volatile fresh food, for the fiscal year through March will rise 2.7%, compared with an expected 2.5% increase in the previous report, while its estimate for the following fiscal year is a 2.4% increase, up from 1.9% previously. For fiscal 2026, the figure is 2%, up from the 1.9% previously estimated.

The central bank has repeatedly said that it intends to raise rates if key economic and price data are on track with its forecasts to meet its sustainable 2% price-growth target backed by wage increases.

As for the timing of the next rate increase, a number of analysts believe that the BOJ will not rush the move, saying the bank will wait another six months or so.

Ueda said the bank’s basic stance toward raising rates will be unchanged, adding that it will depend on the economic and price trends.