Japanese inflation jumps to 2.7 percent in November

TOKYO

Japanese inflation accelerated in November, with prices rising 2.7 percent on-year partly due to higher energy costs, government data showed on Dec.20.

The core Consumer Price Index (CPI), which excludes volatile fresh food prices, topped market expectations and was up from 2.3 percent in October.

It remained above the Bank of Japan's key 2 percent inflation target, set over a decade ago as part of efforts to boost the stagnant economy.

The 2 percent target has been surpassed every month since April 2022, although central bank policymakers have sometimes questioned the role of temporary factors such as the war in Ukraine.

The Bank of Japan on Dec. 19 left its borrowing costs unchanged in a policy decision, warning of uncertainty over the U.S. economy under president-elect Donald Trump.

That caused the yen to fall against the dollar, extending a retreat that began Wednesday when the Federal Reserve forecast it would make fewer interest rate cuts.

"Despite the pause, the BoJ appears determined to tighten policy further," said Stefan Angrick of Moody's Analytics.

"The central bank's monetary policy statement maintains a fairly hawkish tone, arguing that the economy is recovering and will keep growing above its potential rate -- a view that feels at odds with the data," he said.

Weak demand has been a drag on growth for Japan, and it's likely that data will show the economy shrinking in 2024, Angrick said, adding that the bank faced a tricky situation.

"The domestic economy isn't strong enough for significant rate hikes, but maintaining the status quo risks further yen depreciation and higher inflation," he said.

"We anticipate two more rate hikes in 2025."