Bank of Japan Deputy Governor Ryozo Himino said on Thursday that the central bank will continue to raise interest rates if the economy and prices move in line with the bank's forecasts.

The fading shadow of reflationists in the Bank of Japan, and the latest addition to the board of an academic favouring an end to ultra-low interest rates, will likely bring the central bank's thinking closer to global peers taking a more conventional approach on monetary policy.

The Bank of Japan is likely to have two women on its decision-making board for the first time, marking a modest step toward improving gender diversity at the central bank as it struggles to catch up with global peers.

The Bank of Japan made a significant step toward shrinking its massive balance sheet last week, while market watchers were fixated on the biggest interest rate increase from the central bank in 18 years.

The BOJ fumbled its communication in December, surprising investors, but then telegraphed Friday's increase so unambiguously that the rate hike was 90% priced in.

In a well-trailed move, the Bank of Japan on Friday raised the policy rate by 0.25 percentage points, taking it to 0.5 per cent — its highest level in nearly two decades.

Japan's central bank has increased the cost of borrowing to its highest level in 17 years after consumer price rises accelerated in December. The move by the Bank of Japan (BOJ) to raise its short-term policy rate to "around 0.5 per cent" comes just hours after the latest economic data showed prices rose last month at the fastest pace in 16 months.

World shares advanced Friday after U.S. stocks rose to a record and the Bank of Japan raised its key lending rate.

The Bank of Japan has raised short-term interest rates by a quarter point, the highest in 17 years, signalling efforts to normalise monetary policy in response to persistent inflation and increasing wages.

Prime Minister Shigeru Ishiba’s government nominated female economist Junko Koeda to replace Seiji Adachi on the BOJ policy board, according to a statement distributed by a parliamentary committee Tuesday.

Japan’s real rates clearly remain in negative territory even with last week’s interest rate hike, and the Bank of Japan will keep raising rates if its economic outlook is realized, according to Deputy Governor Ryozo Himino.

China is suffering from deflation, devaluation, capital flight and the loss of foreign investment — all at the same time. Unprecedented, far worse than "Japanification."