The Bank of Japan sought to calm fears of a rapid tightening of monetary policy yesterday as it asserted its independence from political control and put an end to more than six years of zero interest rates.

The central bank indicated that it expected to keep interest rates very low for some time, and that it would take a gradual approach to any further tightening, unlike the US Federal Reserve, which has raised rates repeatedly in the past two years.

"The chances are very high that an extremely low interest-rate level will be maintained for some time," said Toshihiko Fukui, BoJ governor. "We do not intend to carry out consecutive rate rises," he said.

The yen hit a two-week low against the dollar after the announcement, as traders speculated that the bank would keep rates on hold until the end of the year.

The yen dropped to Y115.91 against the dollar in early New York trading, from Y115.39 on Thursday.

The Nikkei-225 closed down 252.71 points at 14,845.24.

The Bank of Japan took the historic step of raising interest rates after studying a raft of indicators suggesting that Japan had emerged from a long period of deflation and economic stagnation.

The bank said it would encourage the uncollateralised overnight call rate to remain at about 0.25 per cent, up from effectively zero.

It also raised the basic loan rate, or Lombard lending rate, from 0.1 per cent to 0.4 per cent.

Mr Fukui said the rate rise was "a delightful moment" for the future of the Japanese economy.

"This is an important step towards normalising monetary policy in line with economic conditions that have become normal," the governor said.

In a demonstration of its determination to act independently of the government, the bank ignored warnings that ending zero interest rates could plunge the economy back into deflation, which some politicians insist has not been decisively defeated.