Japan core inflation climbs to a 16-month high, boosting case for rate hikes

Core inflation rate in Japan The interest rate rose to a 16-month high of 3% in December, year-on-year, boosting the Bank of Japan’s expectations of a rate hike.

This is in line with inflation expectations from economists polled by Reuters, and higher than November’s price growth of 2.7%.

The December reading means that the country’s core inflation has matched or exceeded the Bank of Japan’s 2% target for 33 straight months. The core inflation reading only excludes fresh food prices, but includes energy.

Japan’s headline inflation rate was 3.6%, accelerating sharply from 2.9% in November and reaching its highest level since January 2023.

This reading comes amid the Bank of Japan’s monetary policy meeting, which is scheduled to conclude today. The Bank of Japan’s strong inflation reading provides more room to raise interest rates.

The “core” inflation rate, which excludes fresh food and energy prices and is tracked by the Bank of Japan, remained steady at 2.4%.

Immediately after the data was released, the yen fell slightly to trade at 156.1 against the dollar.