Japan's central bank decided to raise its main interest rate on Tuesday for the first time in 17 years. This move ended a long period of having negative interest rates, which were meant to help the economy.
The short-term rate was increased to a range of 0 to 0.1 per cent from minus 0.1 per cent during a policy meeting. Many people were expecting this change, as it shows a move away from very loose monetary policy.
This is the first time the rate has gone up since February 2007.
The bank had set a goal of 2 per cent inflation to show that Japan was no longer in a period of deflation. Even though recent data showed that inflation was around 2 per cent, the bank was still careful about making any big changes to its policies, like stopping negative interest rates.
Another reason for this change is that Japanese companies have said they will increase wages for their workers this year during negotiations with unions.
The head of the Bank of Japan, Kazuo Ueda, had said many times that the bank would think about changing its negative interest rate and other policies if inflation reached 2 per cent and if wages also went up.
The Bank of Japan's way of handling things is different from how the U.S. Federal Reserve and the European Central Bank do it. These banks have been trying to slow down inflation by raising interest rates quickly after keeping them low for a while.
The Bank of Japan has kept interest rates very low for a long time to encourage people and businesses to spend more money and invest, which helps the economy grow.
