The Bank of Japan has raised short-term interest rates to 0.5%, the highest level since the global financial crisis of 2008, citing higher wages and inflation – the central bank’s decision carried by a vote of 8-1.

David Mitchinson, partner and senior portfolio manager at specialist Japan investment boutique Zennor Asset Management was interviewed live on CNBC’s flagship Squawk Box programme earlier this morning (24 January). Here are his thoughts:

“The move by the Bank of Japan shows that it has increased confidence in the durability of inflation and growth rates in Japan. It has been trying for at least 20 years to generate a sustainable, moderate level of inflation. Today's interest hike shows that it thinks that it has just about got there.

"It will be willing to be behind the curve, but it doesn’t want to be too far behind the curve. It has to grapple with both Trump and the Japanese political cycle, but I don't see in any sense that it is moving too fast – rates are only 50 basis points. It's not exactly a tight monetary policy. Most people believe that at a minimum, rates should be around about one per cent, probably higher.

“The Japanese economy is very much a two-track economy. Some areas are booming. If you're in central Tokyo, there is a sense that the economy is booming. If you go to Kyoto, you can hardly move. People have been making some serious money in Japan. You have groups of people in finance or entrepreneurs, who are doing very well, but there's also a big swathe of the broader population who are not. And the BOJ is trying to grapple with this.

“The Bank of Japan and the government want growth in real wages. Last year, for the first time since the bubble economy of the late 80s, we saw that happening. This year the consensus is that we'll probably see another year of real wage growth.

"That's the government's core focus. And if they can achieve that, then they'll feel they’d have more scope to raise interest rates. The current government doesn't have a controlling majority. It is going to have to hold elections later this year and it would like to go into those with a much stronger economy. At the moment it doesn’t have that, so it is looking for real wages to continue to grow for a better outcome.”