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Tokyo core CPI rose 3.8% in December, setting a new 40-year high:

A survey of economists on Friday revealed that consumer prices in the capital of Japan likely increased at the quickest rate in nearly 41 years in December. The market is watching inflation data for signs of a potential change in monetary policy.

According to the median prediction of 16 analysts, the core consumer price index (CPI) in Tokyo, a key predictor of trends in national inflation, was predicted to have increased 3.8% from a year earlier in December due to broadening retail price increases.
That would follow a 3.6% increase in November and mark the highest level since a 4.2% increase in April 1982, when inflation was still high following the oil crisis of the 1970s.

“Price hikes in goods and services will probably continue because many Japanese firms haven’t been able to reflect higher input costs on their selling prices,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. “Global commodity prices have decreased to the pre-Ukraine war levels, and weakness in the yen has abated.”

The CPI numbers for Japan have received exceptional attention as traders search for any signs that the Bank of Japan may begin to end its ultra-loose policy before its rate review on January 17–18. Last month, the central bank shocked the market by unexpectedly adjusting its long-term yield cap, which allowed rates to increase further.

The third-largest economy in the world is expected to rebound through consumption, and economists surveyed for the poll predicted that household expenditure will drop for the first time in three months in November.

According to the poll, household expenditure in November likely decreased by 0.5% from the prior month while increasing by 0.5% from the same month a year earlier.

The survey also indicated that, following an October current account deficit of 64.1 billion yen—the country’s first since January—the balance is anticipated to have improved to a surplus of 471.1 billion yen ($3.52 billion) in November.

On January 10 at 8:30 a.m., the government will publish data on household expenditure and the Tokyo CPI (Jan. 9, 2330 GMT). On January 12 at 8:50 a.m., the current account data is due.

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