Japanese Core Consumer Inflation Accelerating at a Rapid Pace

Core consumer inflation in Japan's capital accelerated in November and stayed above the central bank's 2 per cent target in a sign of broadening price pressure, data showed on Friday, keeping alive market expectations for a near-term interest rate hike.

The yen rose against the dollar after the data, as market players braced for the possibility the Bank of Japan (BOJ) will raise short-term interest rates from the current 0.25 per cent at its next policy meeting in December.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 2.2 per cent in November from a year earlier, exceeding a median market forecast for a 2.1 per cent gain and accelerating from a 1.8 per cent increase in October.

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 1.9 per cent in November from a year earlier after a 1.8 per cent increase in October. The data for Tokyo, which is considered a leading indicator of nationwide price trends, showed households hit by rising rent, utility bills and food costs.

Service-sector prices rose 0.9 per cent in November from a year earlier after a 0.8 per cent gain in October, underscoring the BOJ's view that prospects of sustained wage gains are prodding firms to charge more for services. The dollar fell 0.3 per cent at 151.125 yen after the data's release. Just over half of economists polled by Reuters expect the BOJ to raise rates again at its Dec. 18-19 meeting.