Japan's Core Consumer Prices Jump to 16-Month High, Fueling Rate Hike Expectations
Japan's core consumer prices surged 3.0% year-over-year in December, marking the fastest annual increase in 16 months. This data aligns with market projections and maintains pressure on the Bank of Japan (BOJ) to continue raising interest rates.
The rise in the core CPI, which excludes volatile food prices, aligns with market forecasts and surpasses a 2.7% gain in November. It represents the highest year-on-year increase since August 2023, when prices climbed 3.1%.
Government subsidy reductions aimed at lowering utility bills and persistent high food prices due to the weak yen have primarily driven the price increases.
Stripping out the effects of fresh food and fuels, the index closely monitored by the BOJ rose 2.4% in December year-over-year, unchanged from November.
In March, the BOJ discontinued negative interest rates and subsequently raised its short-term rate target to 0.25%. This move was rooted in the belief that Japan was on track to meet the bank's 2% inflation target.
BOJ Governor Kazuo Ueda has indicated his willingness to raise rates further if expanding wage increases sustain consumer spending and allow businesses to increase prices for both goods and services.