Japan Dec core CPI tipped at 41-year-high 4%, twice BOJ’s 2% target – Reuters poll

TOKYO – Japan’s core consumer prices likely rose 4 percent in December, double the Bank of Japan (BOJ)’s 2 percent target, hitting a fresh 41-year-high, a Reuters poll of economists showed on Friday, testing the central bank’s sustained easy-money policy.

At its first 2023 rate review next week, the BOJ is expected to debate whether further steps are needed to address market distortions after a surprise tweak last month to its policy, which sets some overnight rates below zero and targets the 10-year government bond yield around zero.

Investors tested that policy on Friday, pushing the 10-year yield above the newly set 0.5 percent top of the BOJ’s target band before a wave of emergency bond buying by the central bank reined it back in.

December’s nationwide core consumer price index (CPI), which excludes volatile fresh food items but includes energy, likely rose 4 percent from a year earlier, according to the median estimate of 18 economists.

Core CPI rose 3.7 percent in November, the highest since the 4 percent recorded in December 1981.

“Energy inflation should have accelerated, led by gas bills,” with food prices rising on higher costs of ingredients such as meat, SMBC Nikko Securities analysts said in a note.

Tokyo’s core CPI, a leading indicator of nationwide inflation, rose a faster-than-expected 4 percent in December on widening retail price increases, data showed on Tuesday.

The government will release the December nationwide CPI data at 8:30 a.m. on Friday (2330 GMT on Thursday), after the BOJ ends its policy meeting on Wednesday.

Economists in the Reuters poll forecast wholesale inflation accelerating to 9.5 percent on year in December. Core machinery orders, a leading indicator of business spending, were tipped to fall 0.9 percent on month in November, the first decrease since September.

A forecast 22.4 percent on-year rise in imports, outpacing a 10.1- percent gain in exports, would mean a December trade deficit of 1.6528 trillion yen ($12.84 billion), the 17th month of shortfall.

The wholesale inflation data is due at 8:50 a.m. on Monday (2350 GMT on Sunday), machinery orders at 8:50 a.m. on Wednesday (2350 GMT on Tuesday) and trade at 8:50 a.m. on Thursday (2350 GMT on Wednesday).

($1 = 128.6900 yen)