Core Inflation in Tokyo Accelerates in November

Reuters

10:15 JST, November 29, 2024

TOKYO (Reuters) — Core consumer inflation in Japan’s capital accelerated in November and stayed above the central bank’s 2% 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% at its next policy meeting in December.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 2.2% in November from a year earlier, exceeding a median market forecast for a 2.1% gain and accelerating from a 1.8% 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% in November from a year earlier after a 1.8% 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% in November from a year earlier after a 0.8% 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% at ¥151.125 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.

Separate data showed Japan’s factory output rose 3.0% in October from the previous month, though manufacturers surveyed by the government expect production to fall in coming months.

The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was making steady progress towards durably achieving its 2% inflation target.

Governor Kazuo Ueda has said the BOJ will keep raising rates if inflation remains on track to stably hit 2% as it projects.