Japan CPI rises as expected in Dec, sets the stage for BOJ rate hike
2025.01.23 19:18
Investing.com– Japanese consumer price index inflation grew as expected in December, remaining well above the Bank of Japan’s target range and setting the stage for an interest rate hike by the central bank.
, which excludes volatile fresh food items, grew 3% year-on-year in December as expected, government data showed on Friday.
The reading was at its highest level since mid-2023, and picked up from the 2.7% seen last month.
A core reading that excludes both fresh food and energy prices remained steady at 2.4% in December. The reading is seen as a key indicator of underlying inflation by the BOJ, and remained above the BOJ’s 2% annual target for a fourth consecutive month.
rose to 3.6% y-o-y- a two-year high- in December, from 2.9% in the prior month.
Friday’s CPI data comes just hours before the conclusion of a BOJ meeting, where the central bank is widely expected to .
CPI inflation steadily trended higher in the second half of 2024, rising back above the BOJ’s 2% annual target. Strong private consumption has been the biggest driver of this trend, especially following bumper increases in wages through the past year.
A softer also factored into higher inflation, as the Japanese currency was battered by a mix of low domestic rates and bets on high for longer U.S. interest rates.
The BOJ is expected to raise interest rates amid increasing evidence of a virtuous cycle of higher wages and strong private consumption, which is also expected to support the Japanese economy in the coming months.
Springtime wage negotiations between labor unions and major organizations are expected to yield bumper wage hikes again in 2025, giving the BOJ more impetus to raise rates.
The central bank had last year ended nearly a decade of ultra-loose policy by raising rates for the first time since 2008.
