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The Bank of Japan raised interest rates to a more than 30-year high of 1.25 percent on Friday and said it would lift further as it looks to counter inflation fuelled by surging energy prices and a weak yen.<\/strong><\/p>\n The hike was expected by the markets following the recent tightening by the European Central Bank and the US Federal Reserve.<\/p>\n The central bank\u2019s decision to raise its key rate by 25 basis points was carried by a 7-2 majority vote, the BoJ said on its website.<\/p>\n Pressure has increased on officials to lift borrowing costs as a spike in oil prices caused by the Middle East crisis, which shows little sign of ending anytime soon, is expected to keep putting upward pressure on inflation.<\/p>\n Central bankers are also minded to support the yen, which fell in July to its weakest level against the dollar in 40 years, prompting a historic joint intervention in foreign exchange markets by the United States and Japan.<\/p>\n \u201cAs for the future conduct of monetary policy, given that underlying CPI inflation has been approaching two percent and financial conditions have been accommodative, the bank will continue to raise the policy interest rate,\u201d the BoJ said.<\/p>\n Ahead of Friday\u2019s decision, the yen softened to 156.23 per US dollar in early trading.<\/p>\n Japan\u2019s Nikkei was 0.9% higher.<\/p>\n Asian stocks rose and the dollar held its ground against other currencies on Friday as investors contended with global policymakers ramping up efforts to rein in inflation, with a dip in oil prices improving sentiment.<\/p>\n MSCI\u2019s broadest index of Asia-Pacific shares outside Japan rose 0.55%. The tech-heavy South Korea\u2019s KOSPI surged 2%.<\/p>\n Hopes of alternate ways for oil supply from the Middle East to reach markets pushed Brent crude oil futures down 1% to $103.77 a barrel even as concerns about strikes between Saudi Arabia and Yemen\u2019s Houthis lingered.<\/p>\n The euro was steady at $1.148, but on course for a 1% drop for the week, its biggest fall since June.<\/p>\n In commodities, spot gold rose 0.5% to $4,361 an ounce.<\/p>\n Hours before the BOJ\u2019s rate decision, Japan released core consumer inflation data for August.<\/p>\n The numbers held steady near the central bank\u2019s 2% target in August, highlighting mounting price pressures that solidify the case for an interest rate hike.<\/p>\n The core consumer price index (CPI), which excludes volatile fresh food prices but includes fuel costs, rose 1.7% in August from a year earlier, according to official data.<\/p>\n The increase was below the median market forecast of 1.8% and followed a 1.8% rise in July.<\/p>\n An index that strips away the effects of both volatile fresh food and fuel, which is closely watched by the BOJ as a better gauge of demand-driven price pressures, rose 1.9% in August from a year earlier.<\/p>\n Core inflation has stayed below the BOJ\u2019s 2% target for eight straight months, as government subsidies aimed at curbing utility bills offset price hikes for a broad range of goods.<\/p>\n But rising fuel costs from the Middle East conflict and higher import prices from a weak yen have added price pressure to the economy, prodding warnings from the BOJ of the risk of an inflation overshoot.<\/p>\n<\/div>\n