The Bank of Japan decided Tuesday to raise the discount lending rate by 0.75 points to 3.25 percent, marking an end to its easy credit policy in effect since August 1980, officials said.
The central bank decision, which takes effect Wednesday, followed the recent rapid rise in the value of the U.S. dollar against the Japanese yen that increased inflationary pressure at home.Bank of Japan Governor Satoshi Sumita said in a statement that the discount rate increase is aimed at "stabilizing prices and maintaining sustained economic growth led by domestic demand."
The Bank of Japan has carried out active intervention to bolster the yen's value since May 22.
Central bank officials said the Bank of Japan was concerned over growing inflationary pressure caused by the dollar's advance.
A weaker yen makes imported products more expensive although it makes Japanese exports more competitive on overseas markets.