Japan’s central bank begins unwinding one of the world’s most aggressive monetary easing programmes.

The Bank of Japan on Tuesday raised the policy short-term rate from -0.1 percent to between zero and 0.1 percent – the first such hike in 17 years.

Officials “assessed the virtuous cycle between wages and prices, and judged it came in sight that the price stability target of two percent would be achieved in a sustainable and stable manner towards the end of the projection period of the January 2024 Outlook Report”, the BOJ said.

The central bank also said it would end other unorthodox policies, including its yield curve control programme on bonds and the purchase of exchange-traded funds (ETFs).

The moves come after Japan’s largest trade union on Friday secured a wage increase of 5.3 percent from employers, the biggest since 1991.

BOJ Chief Kazuo Ueda had repeatedly said the bank would review its negative rate and other easing measures if inflation hit 2 percent and wages rose.

The BOJ for years bucked a global trend of higher interest rates driven by soaring inflation in the wake of Russia’s invasion of Ukraine.

Japanese policymakers’ ultra-loose policies aimed to reverse several “lost decades” of stagnation and deflation set in motion by the collapse of a massive asset bubble in the early 1990s.

Japan last month officially lost its spot as the world’s third largest economy, slipping behind Germany.