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.

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.

The Bank of Japan has raised short-term interest rates by a quarter point, the highest in 17 years, signalling efforts to normalise monetary policy in response to persistent inflation and increasing wages.