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.

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

Australia's export price index rose 3.6%, while its import price index advanced 0.2% in the fourth quarter of 2024.

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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.

Outside of a U.S. President bending norms, the Fed also faces challenges in achieving its economic objectives. Inflation remains above its 2% target: Its preferred measure is at 2.4%, though core prices — considered a better gauge of where inflation is headed — rose 2.8% in November from a year ago.

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.

Wall Street stocks retreated Friday as the market's latest rally lost steam, while the yen pushed higher after the Bank of Japan lifted interest rates. In Japan, Tokyo's stock market dropped and the yen rallied after the Bank of Japan lifted borrowing costs to their highest level since 2008 and flagged further increases in the pipeline.

The yen was on track for its best monthly start to the year since 2018 on Friday, helped by the view that the Bank of Japan (BOJ) is likely to keep raising rates this year while its global peers elsewhere look to ease policy.

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 eurozone cuts,

Bank of Japan (BoJ) Governor Kazuo Ueda said on Friday that underlying inflation is still somewhat below 2%. Ueda added that the Japanese central bank would maintain an accommodative policy to support price trends. Recent inflation is driven mostly by cost-push factors.

The yen made broad gains on Thursday as Japan looks on track to keep raising interest rates while others cut, with the European Central Bank seen certain to deliver the latest in a series of policy easings later in the day.