Tokyo's inflation rebounds beyond expectations, raising expectations for a Bank of Japan interest rate hike in December

According to the Zhitong Finance APP, as the Japanese government reduces energy subsidies, inflation in Tokyo accelerated this month, while overall data indicates that the country's price growth trend remains broadly consistent with the Bank of Japan's forecasts. Data released by Japan's Ministry of Internal Affairs and Communications on Friday showed that the core consumer price index (CPI) in Tokyo rose 2.2% year-on-year in November, up from 1.8% the previous month. This result exceeded economists' expectations of 2%. Due to rising food prices, the overall inflation rate increased to 2.6%. Following the data release, the yen appreciated against the US dollar. Tokyo's inflation data is typically regarded as a leading indicator of national inflation trends in Japan. Friday's data from Tokyo indicates that inflationary momentum still exists in Japan, which may lead market participants to continue speculating about a potential interest rate hike by the Bank of Japan next month. Bank of Japan Governor Kazuo Ueda has repeatedly stated that borrowing costs will be raised if economic performance meets expectations. Other reports released on Friday showed that Japan's labor market remains relatively tight, with the ratio of job openings to applicants rising to 1.25, while the unemployment rate slightly increased to 2.5%. The Tokyo CPI data released on Friday is the last government inflation report before the Bank of Japan makes a decision on the benchmark interest rate on December 19. Ueda stated last week that it is impossible to predict the outcome of the meeting, suggesting that the next meeting will discuss whether to raise interest rates on-site. Former Prime Minister Fumio Kishida decided to significantly reduce energy subsidies starting this month, as he hopes to gradually phase out this temporary measure. However, Kishida's successor, Shigeru Ishiba, has decided to reintroduce this measure starting in January next year. The effects of subsidies often reflect in inflation data with a lag. The market expects the Bank of Japan to raise interest rates by 25 basis points soon. More than 80% of economists surveyed by Bloomberg expect another rate hike before January next year. Before the Tokyo CPI data was released, a series of economic indicators, including GDP, showed that the Japanese economy is experiencing a moderate recovery. Japan's national inflation rate has remained at or above the Bank of Japan's 2% target level for more than 30 consecutive months, which has weakened consumers' purchasing power. Data released on Friday showed that Japan's industrial output rose 3.0% month-on-month in October, while retail sales increased 0.1% month-on-month. Consumption remains a key aspect of the Japanese economy, and as countries prepare to cope with the impact of US President-elect Donald Trump's tariff policies, the Japanese economy may face headwinds. Industrial output in Japan is expected to decline by 2.2% in November and by 0.5% in December. Ishiba has announced a stimulus plan aimed at promoting economic growth and protecting consumers from inflation, and the Japanese cabinet is expected to approve an additional budget later on Friday