Consumer inflation in Japan's capital exceeds BOJ target for 7th month

TOKYO : Core consumer prices in Japan's capital, a leading indicator of nationwide trends, rose a faster-than-expected 4.0 per cent in December from a year earlier, exceeding the central bank's 2 per cent target for a seventh straight month in a sign of broadening inflationary pressure.

The increase, which was the fastest pace in four decades, will likely underpin market expectations the Bank of Japan (BOJ) may phase out its massive stimulus by tweaking its yield control policy.

The rise in the Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel, exceeded a median market forecast of 3.8 per cent and a 3.6 per cent gain seen in November, government data showed on Tuesday.

The last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2 per cent higher than a year before.

The Tokyo core-core CPI index, which excludes fuel as well as fresh food, was 2.7 per cent higher in December than a year earlier, picking up from the 2.5 per cent annual gain seen in November.

The rise in Tokyo CPI heightens the chance nationwide consumer inflation likely stayed above the BOJ's 2 per cent target in December.

BOJ Governor Haruhiko Kuroda has dismissed the chance of a near-term interest rate hike on the view the bank must keep supporting the economy until the current cost-push inflation turns into a demand-driven one accompanied by higher wages.

But Japan's long-term interest rates have crept up since the BOJ stunned markets last month by widening the band around its 10-year bond yield target, a move investors saw as a prelude to a future rate hike.