Tokyo Consumer Price Index Inflation

Investing.com – Tokyo's consumer price index (CPI) inflation grew more than expected in December, driven by increased price pressures, which keeps alive the prospect of a near-term rate hike by the Bank of Japan (BoJ).

Core CPI inflation, excluding volatile fresh food items, rose by 2.4% year-on-year in December, according to government data released on Friday. This figure was slightly below expectations of 2.5% and up from 2.2% seen in the previous month.

A core reading that omits both energy and fresh food costs increased by 1.8% in December, down from 1.9% in November. This metric is closely monitored by the Bank of Japan as an indicator of underlying inflation, but it remained below the central bank’s 2% annual target for the ninth consecutive month.

Headline CPI inflation rose to 3.0% from 2.6% a month prior.

Muted underlying inflation may constrain the BOJ’s plans to continue raising interest rates, considering the central bank has expressed a need for more indications that inflation will sustainably linger around the 2% target.

The BoJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July. It has shown a willingness to raise rates further if wage and price trends align with its forecasts.

Earlier this week, BOJ Governor Kazuo Ueda stated that the economy is expected to make progress towards sustainably achieving the central bank's 2% inflation target next year, suggesting an interest rate hike could be on the horizon.

The BoJ maintained rates this month but is anticipated to increase rates during its Jan. 23-24 policy meeting. A Reuters poll conducted earlier this month predicts the BoJ will raise interest rates to 0.5% by March of the following year.