The Bank of Japan raised its policy interest rate by 25 basis points to 1.25%, the highest level since 1995.

The decision, approved by a 7-2 vote, marked a faster pace of rate increases as the BOJ seeks to keep inflation near its 2% target.

The central bank cited the risk that inflation could rise above its target, while Japan continues to experience elevated prices and a historically weak yen.

Two board members opposed the increase, arguing that underlying inflation and economic conditions did not yet justify higher rates, CNBC has reported.

The rate hike was widely expected by economists and comes amid pressure from the United States for Japan to continue tightening monetary policy.