Japan inflation slows in December as energy bills drop

TOKYO - Japanese consumer inflation slowed again in December due to lower electricity and gas bills, government data showed Friday, ahead of a Bank of Japan policy decision next week.

Prices in the world's third-largest economy, excluding volatile fresh food, rose 2.3 percent year-on-year in December, down from 2.5 percent the previous month.

The figure was in line with market expectations and continued a broad trend of cooling inflation over the past year, down from 4.2 percent in January 2023.

Although inflation remains above the Bank of Japan's longstanding two-percent target, the bank is widely expected to keep its monetary easing measures in place on Tuesday.

Unlike other major central banks that have raised interest rates, the BoJ has stuck to its ultra-loose policy, putting pressure on the yen.

The BoJ stood pat last month and offered no guidance on its plans for the new year, sending the yen down against the dollar and boosting stocks.

Speculation had been swirling for weeks that the bank would shift away from negative interest rates and a tight grip on bond yields as prices ticked above two percent.

BoJ governor Kazuo Ueda has repeatedly said that "a virtuous cycle of wages and prices" is necessary for the bank's inflation target to be achieved sustainably.