Core consumer prices in Japan's capital, a leading indicator of nationwide trends, rose a faster-than-expected 4.0% in December from a year earlier, exceeding the central bank's 2% target for a seventh straight month in a sign of broadening inflationary pressure.
The increase, which was the fastest pace in four decades, will likely underpin market expectations the Bank of Japan (BOJ) may phase out its massive stimulus by tweaking its yield curve control policy.
"It's clear Japan's inflation is perking up as a trend. The economy's output gap will also likely to turn positive soon," said Mari Iwashita, chief market economist at Daiwa Securities.
"All in all, we're seeing more data that will give the BOJ reason to eventually normalise monetary policy," she said.
The rise in the Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel, exceeded a median market forecast of 3.8% and a 3.6% gain seen in November, government data showed on Tuesday.
The last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year before.
The Tokyo core-core CPI index, which excludes fuel as well as fresh food, was 2.7% higher in December than a year earlier, picking up from the 2.5% annual gain seen in November.
