After a long period of stagnation, the return of inflation and wage growth is giving the Bank of Japan room to raise interest rates.

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 decision by the central bank came at the end of a two-day policy board meeting in Tokyo.

Japan’s consumer price growth picked up in December, adding to evidence of steady inflation just hours before the central bank announces its rate decision.

The Bank of Japan raised its short-term interest rate to the highest in seventeen years on Friday as expected, aiming for a