Bank of Japan raises interest rates to the highest in 30 years, warns of more hikes

Bank of Japan on Friday, December 19, hiked its interest rates to the highest level in 30 years.

It has hiked the overnight call rates by 25 basis points to 0.75%.

The Bank of Japan said real interest rates are expected to stay significantly negative.

BoJ said it will keep raising rates if the economy, price outlook is realised.  Wage prices are likely to keep rising, it added.

Yen has extended its decline to an intraday low after the Bank of Japan decision.

In a widely expected move, the BOJ raised short-term interest rates to 0.75% from 0.5% in the first increase since January. The decision was made by a unanimous vote.

The move takes interest rates to levels unseen since 1995, when Japan was reeling from the burst of an asset-inflated bubble that drew the BOJ into a prolonged battle with deflation.

"Given that real interest rates are at significantly low levels, the BOJ will continue to raise interest rates and adjust the degree of monetary accommodation" if its economic and price forecasts materialise, the central bank said in the statement.

Markets are focusing on Governor Kazuo Ueda's post-meeting news briefing for clues on the pace and extent of future rate rises, which may have global market repercussions by altering the yen's status as a cheap source of funding for investors.

With inputs from Reuters