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 Factory output also grew in December and manufacturers expect to
keep increasing production, although some analysts fret about the
potential damage from the recent turmoil in emerging markets.
"The core consumer price index was stronger than expected, and
durable goods prices seem to be rebounding. Consumer prices will
likely continue its moderate growth," said Junko Nishioka, chief
economist at RBS Securities.
"I think the BOJ is unlikely to adopt additional easing because
there is no reason to justify it given the positive macro-economic
environment."
Core consumer prices (CPI), which excludes fresh food but include
energy costs, rose 1.3 percent in December from a year ago, data
showed on Friday, just above a median market forecast for a 1.2
percent gain.
That followed a 1.2 percent increase in November, and marked the
fastest annual gain since 1.9 percent in October 2008, data from the
Ministry of Internal Affairs and Communications showed.
In a sign price gains are broadening, the so-called core-core
inflation index, which excludes food and energy prices and is
similar to the core index used in the United States, rose 0.7
percent in the year to December, matching a high hit in August 1998.
Japan's industrial output rose 1.1 percent in December, suggesting
that robust domestic demand is underpinning the economy as consumers
rush to beat a national sales tax hike in April. This is making up
for soft exports to emerging markets.
The rise roughly matched a median market forecast of a 1.2 percent
increase and followed a 0.1 percent drop in November.
The jump in output is a welcome sign for the world's third-largest
economy, which has steadily recovered over the past year on the back
of Prime Minister Shinzo Abe's massive fiscal and monetary stimulus
policies.
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Manufacturers surveyed by the Ministry of Economy, Trade and
Industry expect output to rise 6.1 percent in January and increase
0.3 percent in February, data showed on Friday.
Robust domestic demand, coupled with a weak yen that inflates
import costs, helped Japan pass the halfway mark toward achieving
the BOJ's 2 percent inflation target.
BOJ Governor Haruhiko Kuroda has expressed confidence that prices
will reach the bank's target in the two-year timeframe it pledged in
adopting an aggressive stimulus policy in April.
But many analysts remain skeptical on whether price growth will
accelerate from here, worried about an expected slump in consumption
after the tax hike and the fading boost from the weak yen on prices.
An International Monetary Fund official said Japan's economy is
likely to take longer than the two-year timeframe to reach the
inflation goal, even though prices are rising steadily.
(Editing by Shri Navaratnam)
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