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.

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.

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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.

S&P 500 E-Mini futures (ESH25) are up +0.46%, andMarch Nasdaq 100 E-Mini futures (NQH25) are up +0.73% this morning as solid earnings from Apple and Intel buoyed sentiment, while investors geared up for the release of the Federal Reserve’s first-line inflation gauge.

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,

Asian shares wavered on Friday, weighed down by the return of tech-heavy South Korean stocks from holidays, but relatively strong earnings from U.S. tech giants kept risk sentiment intact while tariff threats pushed the dollar and gold prices higher.

In Japan, the yen was last a touch stronger at 154.19 per dollar, having already climbed more than 1% for the week thus far. It was set to gain 1.9% for the month, which would mark its best January performance in seven years.