Japan's core consumer inflation hit a fresh four-decade high fueled in part by higher energy prices and as a result of rising costs being passed onto households, the data released on Friday showed.
Core consumer prices index (CPI), which excludes volatile fresh food costs, climbed 3.7% in November year-on-year in the fastest rise since 1981, leaving the central bank under pressure to whittle down massive stimulus.
Months before Tuesday's surprise tweak to its yield control policy, Bank of Japan (BOJ) policymakers had discussed the potential market impact of a future exit from ultra-low interest rates, minutes of their October meeting showed on Friday.
While many retailers plan further hikes for food products next year, the outlook for inflation and the timing of any further BOJ policy tweaks are muddled by the risk of global recession and uncertainty over the pace of wage hikes, analysts say.
"The hurdle for policy normalization isn't low. The global economy may worsen in the first half of next year, making it hard for the BOJ to take steps that can be interpreted as monetary tightening," said Takeshi Minami, chief economist at Norinchukin Research Institute.
The November figure is still well below the sky-high levels that have sparked concern in the United States, Britain and elsewhere, but far exceeds the BOJ's long-term goal of 2.0%.
Even excluding fresh food and energy, the index was up 2.8%.
And aside from utility bills, prices rose for a broad range of goods from fried chicken and smartphones to air conditioners, in a sign of mounting inflationary pressure, the internal affairs ministry's data showed.
"Although low by international standards, Japanese consumer price inflation at three percent to four percent is high enough to feel uncomfortable with stagnant wage growth," wrote Sarah Tan, an economist at Moody's Analytics, in a note.
The Japanese CPI index has risen consistently since the beginning of the year, putting pressure on the BOJ to make adjustments to its longstanding monetary easing policies.
However, unlike the U.S. Federal Reserve (Fed) and other central banks which sharply hiked interest rates this year to tackle inflation, the BOJ says it sees the recent price increases as temporary and that there is no reason to change course yet.
The starkly different approaches taken by the BOJ and the Fed have driven down the value of the yen against the dollar this year from about 115 yen per dollar in March to as low as 151 yen. The currency has recovered somewhat, helped by government interventions.
The shift to its monetary policy BOJ delivered on Tuesday induces the yen to strengthen rapidly. And while the change falls short of a rate hike, analysts said it could help arrest the yen's declining value.
Koya Miyamae, the senior economist at SMBC Nikko Securities, said prices in the country were likely to continue rising in the short term.
"The core CPI rose in November because of rises in food prices and gas. The index will probably rise further, nearing or potentially rising above 4% in December," he told Agence France-Presse (AFP).
"But core CPI will remain above two percent next year, while the pace of the rise in wages is not catching up with inflation," he added.
The latest CPI index rate is closest to the 4.0% jump seen in December 1981, when inflation was still high from the impact of the 1979 oil shock and a booming economy.