The country's central bank signaled that it would reverse two decades of policy precedent and begin to move away from loose monetary policy intended to keep wages and prices high.

The move, which opens the door to future rate hikes, stoked investors' fears that the global war on inflation is still roaring on and that recession is unavoidable.

The Japanese Central Bank loosened the yield on its 10-year government bonds from 0.25% to 0.5%. At the same time, the bank will increase its monthly bond purchases to $67 billion from around $55 billion.

The move sent the yen soaring to a four-month high against the U.S. dollar, its largest one-day jump in 24 years and wreaked havoc on global stock and bond trading.

Japanese rates remain low, but Tuesday's move means that the world's third-largest economy now sees inflation as a risk. That's a big change: Japan had been keeping inflation low for decades in efforts to fight a prolonged strong yen and deflationary recession that stagnated the Japanese economy. Lately, the country has felt the impacts of an aging and falling population which has kept consumer demand and inflation low.

The BOJ policy minutes noted the shift. Core consumer price rises are now around 3.5%, still lower than in the United States and Europe but an increase from the previous statement. The central bank said that inflation expectations have risen.