Tokyo Inflation Cools More Than Expected, But Unlikely to Halt BOJ Rate Hikes

Tokyo inflation cooled more than expected in December as easing pressure from food and energy costs took hold—but the slowdown won’t likely deter the Bank of Japan (BOJ) from continuing interest rate hikes. Data released Friday by Japan’s Ministry of Internal Affairs and Communications showed Tokyo’s core CPI (excluding fresh food) rose 2.3% year-over-year in December, a sharp slowdown from the prior month’s 2.8%. That’s the first inflation deceleration since August, driven mainly by moderating food price gains and falling energy costs. Economists had forecast the gauge would slow to 2.5%. The overall CPI fell to 2.0% (from 2.7% in the year-ago period), while the core gauge excluding energy prices also slowed to 2.6%. Tokyo’s inflation data is widely viewed as a leading indicator of national inflation trends. Even with the clear slowdown, inflation remains above the BOJ’s 2% target—prompting the central bank to stick to its path of further policy tightening.