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 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.

Japan’s central bank has hiked interest rates as expected to a 17-year high as it continues on a path to normalise its monetary policy. On Friday (Jan 24), the Bank of Japan (BOJ) raised short-term rates by 25 basis points to 0.5 per cent, its highest level since the 2008 global financial crisis.