Japan Data Show Some Signs of Improvement in Economy

By Megumi Fujikawa

TOKYO--A series of Japanese economic data on Friday showed steady signs of improvement ahead of a closely watched Bank of Japan's policy meeting in December.

Data showed that consumer prices, excluding fresh food, for the Tokyo metropolitan area rose 2.2% in November from a year earlier, compared with October's 1.8% rise. That marked the first acceleration in the pace of inflation in three months.

The reading was also slightly higher than the 2.1% forecast in a poll of economists by data provider Quick. Tokyo prices are considered an early indicator of nationwide trends, suggesting that inflation is developing in line with the central bank's expectations.

Energy prices increased 7.4% on the year in November due to the receding effects of government energy subsidies. Service prices--which BOJ Gov. Kazuo Ueda is keeping a close eye on--rose 0.9%, slightly faster than October's 0.8% increase.

The pickup in inflation likely backs the view for an imminent interest-rate increase, which pushed the yen higher Friday morning. The yen briefly strengthened to 150.00 against the dollar from around 151.50 earlier in the session. Some economists and investors expect the BOJ to raise interest rates at its next meeting in late December, but others see January as a more likely option.

The Tokyo CPI print backs Capital Economics' long-held call for a rate hike in December.

Given the correlation with the nationwide gauge, the research firm estimates that national inflation excluding fresh food and energy also likely rose above the BOJ's 2% target in November.

"And with the yen set to remain weak for longer and the upcoming Shunto [wage negotiations] set to result in another large pay hike, we expect inflation excluding fresh food and energy to remain above 2% for most of next year," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

A separate government data release sent a positive signal on consumer demand as well, another factor that the BOJ has been looking for as it seeks to create the conditions for a virtuous cycle of spending and price growth.

Despite growing inflation, retail sales rose 1.6% in October from a year earlier, compared with a 0.7% increase in September, data on Friday showed.

October's industrial production release continued the positive data flow, with output rising 3.0% from the previous month, up sharply from September's 1.6% rise.

Still, companies expect production to decline 2.2% in November, according to the data.

Write to Megumi Fujikawa at [e-mail]

(END) Dow Jones Newswires

11-28-24 2031ET