The Bank of Japan has ended the world’s last negative interest rate policy as it raised borrowing costs for the first time in 17 years.

The short-term rate was raised to a range of 0 to 0.1pc from minus 0.1pc at a policy meeting that confirmed expectations of a shift away from ultra-lax monetary policy.

It is the first rate hike since February 2007 after the Bank said that the negative interest rate policy, combined with other measures to inject money into the economy and keep borrowing costs low, “have fulfilled their roles”.

The shift makes Japan the last central bank to exit negative rates and ends an era in which policymakers around the world sought to prop up growth through cheap money and unconventional monetary tools.

The switch comes as inflation headed towards the Bank of Japan’s 2pc target in recent months.

The shift was also influenced by Japanese companies announcing relatively robust wage increases for this year’s round of negotiations with trade unions.

Wages and profits at companies were improving, the Bank of Japan said, in releasing its latest decision, referring to “anecdotal” accounts as well as data it had gathered lately.

“Japan’s economy has recovered moderately,” it said.

There was scant reaction in markets to the decision, which had been widely anticipated. Tokyo’s benchmark Nikkei 225 index gained 0.7pc, while the Japanese yen fell 0.3pc to 149.66 per dollar.

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