Inflation in Tokyo decelerated to the slowest pace in over a year, a development that largely fits in with the Bank of Japan's view that price pressures are cooling, and its cautious stance over any paring back of stimulus.

Consumer prices excluding fresh food rose 2.3% in November from the prior year in the capital, largely due to weaker electricity, gas and processed food prices, according to the ministry of internal affairs Tuesday. Inflation slowed from 2.7% in October, and came in below economists' forecast of 2.4%.

Tokyo figures are a leading indicator of the national trend and suggest that the country's price growth also moderated last month. 

Friday's data support BOJ Governor Kazuo Ueda's view that prices will cool, after an unexpected acceleration in the previous month. The slowdown may encourage the central bank to wait for other signs that its wage-gain-accompanied inflation target will be achieved, cooling market speculation over an early policy shift. 

A deeper measure of the inflation trend that strips out fresh food and energy prices also decelerated to 3.6%, slowing steadily for the third consecutive month.

In the latest outlook report released in October, the BOJ revised up its projection for its key inflation gauge for the current and next fiscal years to 2.8%, meaning it sees three consecutive years of price increases exceeding the 2% target. Still, the bank set its price forecast for fiscal year 2025 at 1.7%, implying that current levels of inflation won't last indefinitely. 

Source : Bloomberg