The Bank of Japan raised has interest rates and projected inflation to stay about its two per cent target in coming years, signalling its resolve to steadily unwind a decade of massive monetary stimulus.

At the two-day policy meeting that ended on Wednesday, the central bank also laid out a detailed quantitative tightening plan that will reduce monthly bond buying in several stages to about three trillion yen ($A30 billion) as of January-March 2026.

The nine-member board decided to hike the overnight call rate target at 0.25 per cent from 0-0.1 per cent by a 7-2 vote.

Bank governor Kazuo Ueda will hold a news conference to explain the decision.

This post was originally published on Michael West.