Data released on Tuesday morning by the Bank of Japan showed that the central bank's core inflation rate exceeded expectations, accelerating in December, reaching its highest level in six months.
According to the data, the Bank of Japan's core consumer price index grew by 1.9% year-on-year in December, which was higher than market expectations that indicated a stabilization of the core inflation rate at 1.7%. The previous reading of the Bank of Japan's core inflation rate was 1.7% in November.
It is worth noting that the Bank of Japan's core inflation index measures the change in the prices of goods and services purchased by consumers, excluding food and energy. Food and energy prices account for about a quarter of the overall consumer price index, but they tend to be very volatile, which can disrupt the fundamental trend of inflation.
The Bank of Japan usually pays more attention to core inflation data, as do traders, since this impacts monetary policy decisions of the Bank of Japan, which in turn affects the movements of the Japanese yen.
