Japan’s central bank on Friday raised its benchmark interest rate by 25 basis points to 0.75%, the highest level since 1995, pressing ahead with policy normalization as inflation remains above its 2% target.

The move by the Bank of Japan (BOJ) was in line with expectations from economists polled by Reuters and underscores the bank’s confidence that price growth is becoming more sustainable after years of ultra-loose monetary policy.

Japan’s consumer inflation slowed slightly in November, with headline prices rising 2.9% from a year earlier, government data showed on Friday. That marked a deceleration from October but still kept inflation above the BOJ’s target for nearly four consecutive years.

Core inflation, which excludes volatile fresh food prices and is closely watched by policymakers, was unchanged at 3.0% from October, matching the average estimate in a Reuters poll. The persistence of core inflation has strengthened the BOJ’s case that underlying price pressures are no longer transitory.

Financial markets reacted calmly to the widely anticipated decision. Japan’s Nikkei 225 index rose 1.33% on the day, while the broader Topix index gained 1.06%, reflecting investor confidence that higher borrowing costs would not derail the country’s economic recovery.

The Japanese yen weakened following the announcement, slipping 0.33% to 156.06 per U.S. dollar, as traders assessed the pace of future rate increases and the still-wide interest rate gap between Japan and other major economies.

The BOJ’s latest move marks another step away from decades of deflation-fighting measures, including negative interest rates and aggressive asset purchases. Policymakers have signaled that future decisions will depend on whether wage growth and domestic demand can support inflation on a more durable basis.