Tokyo’s November inflation rate tops 40-year high

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Tokyo’s November inflation rate tops 40-year high

In Japan's capital, consumer prices rose by 3.6% in November from a year earlier in the year, marking the fastest annual pace in 40 years in a sign of increasing inflationary pressure.

The rise in raw material costs on households affected the outlook for consumption and Japan's fragile economic recovery, which was mainly driven by electricity bills and food prices.

The rise in the Tokyo core consumer price index CPI, which does not include fresh food but includes fuel, exceeded a median market forecast for a 3.5% gain and accelerated from a 3.4% increase seen in October, government data showed on Friday.

Consumer inflation in Tokyo remained above the Bank of Japan's 2% target for a sixth month in November, casting doubt on its belief that recent price rises due to higher costs will prove to be transitory.

The Tokyo core-core CPI index, which strips away both fresh food and fuel costs, was 2.5% higher in November from a year earlier, pacing up from a 2.2% annual gain seen in October.

The BOJ has kept interest rates low, believing that inflation will slow down next year when fuel price gains dissipate. The central bank has remained an outlier from a wave of monetary tightening around the world to combat soaring inflation.

In some western economies, where wages have surged with inflation, the growth in wages and services prices in Japan remains muted.

Services prices in November were up just 0.7% on a year ago, after a 0.8% increase in October, according to the Tokyo CPI data. It was the same as October's 7.0% annual gain, which led to a 7.7% increase in durable goods prices for November.

Separate data released by the BOJ on Friday showed the corporate service price index, which measures prices firms charge each other for services, had been 1.8% higher in October than a year ago. It was slower than the 2.1% annual gain seen in September.

In order to sustainably hit his 2% inflation target, wages must rise enough to offset the rise in goods prices, according to BOJ Governor Haruhiko Kuroda.