TOKYO : Core inflation in Japan’s capital accelerated in December as price pressures broadened, data showed on Friday, keeping alive market expectations for a near-term interest rate hike.
The data will be among factors the Bank of Japan (BOJ) will scrutinise at its next policy meeting on Jan. 23-24, when some analysts expect it to hike short-term interest rates.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 2.4 per cent in December from a year earlier, compared with a median market forecast for a 2.5 per cent gain. It followed a 2.2 per cent year-on-year rise in November.
Another index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of demand-driven inflation, rose 1.8 per cent in December from a year earlier after increasing 1.9 per cent in November, the data showed.
The Tokyo inflation data, considered a leading indicator of nationwide trends, is closely watched by policymakers for clues on how much progress Japan is making towards durably meeting the BOJ’s 2 per cent inflation target – a prerequisite for more rate hikes.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25 per cent in July on the view Japan was making steady progress on meeting its inflation goal.
Governor Kazuo Ueda has signaled a readiness to raise interest rates again if the economy and prices move in line with the board’s projections.
All respondents in a Reuters poll earlier this month expect the BOJ to hike interest rates to 0.5 per cent by March next year. Its decision to keep rates steady this month has heightened market attention on whether a hike would come at its next meeting on Jan. 23-24, or a subsequent rate review on March 18-19.