The Bank of Japan (BOJ), the country 's central bank, decided on Friday to lift the zero-interest-rate policy for the first time since August 2000.

The unsecured overnight call money rate hike was proposed by BOJ Governor Toshihiko Fukui earlier on Friday, the last day of the BOJ's two-day Monetary Policy Board meeting, and was approved by the nine-member board unanimously, Kyodo News said.

The key short-term interest rate was raised from zero to 0.25 percent immediately. Interest rates on deposits and housing loans would also be raised due to the policy change.

In a statement, the BOJ said the policy change would contribute to "ensuring price stability and achieving sustainable growth in the medium to long term."

The BOJ also decided on the same day to raise the official discount rate from the current 0.1 percent to 0.4 percent.

The policy change demonstrated a move toward normalization of Japan's monetary policy, Kyodo quoted analysts as saying.

Fukui make it clear that the central bank will maintain a relatively accommodative monetary policy for the time being to support continued economic growth and is not hasty for subsequent rate hikes.

A series of economic data prompted the rate hike mull of the BOJ, which believes that there is little possibility for the economy to fall back into deflation.

The Japanese government was initially cautious about a rate hike, citing continuing deflation of the economy. However, many crucial Cabinet ministers, including Prime Minister Junichiro Koizumi, have shifted their stands recently and supported the central bank to make a policy change at an appropriate time.

Japan's zero-interest rate has been effective since March 2001, when the BOJ started to implement quantitative monetary easing policy.

Source: Xinhua