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Jan core CPI rises 3.2% yr/yr vs forecast +3.1%

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Index excluding fuel costs up 2.5% yr/yr

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Data underscores rising price pressures as costs increase

By Leika Kihara

TOKYO, Feb 21 (Reuters) - Japan's core consumer price

index rose 3.2% in January from the previous year to hit a

19-month high, data showed on Friday, reinforcing expectations

the central bank will continue to raise interest rates from

still-low levels.

The increase in the core consumer price index (CPI), which

excludes fresh food prices, compared with a median market

forecast for a 3.1% gain and followed a 3.0% rise in December.

Inflation has exceeded the central bank's 2% target for

nearly three years, underscoring rising inflationary pressure

that has drawn hawkish remarks from Bank of Japan (BOJ)

policymakers such as those by board member Hajime Takata on

Wednesday.

A separate index stripping away both fresh food and fuel

costs, which is closely watched by the BOJ as a better gauge of

demand-driven inflation, rose 2.5% in January from a year

earlier, the data showed. It was the fastest year-on-year pace

since March 2024, when the index rose 2.9%.

The data follow recent steady rises in Japanese government

bond (JGB) yields, as markets factor in the chance the BOJ could

hike rates more aggressively than initially thought on prospects

of sustained wage gains that could spur consumer spending.

The BOJ raised its short-term interest rate to 0.5% from

0.25% in January, reflecting its conviction that Japan was

making progress in sustainably achieving its 2% inflation

target.

Governor Kazuo Ueda has signalled his readiness to keep

raising rates if wages continue to increase and underpin

consumption, thereby allowing firms to keep hiking pay.

Japan's economy expanded an annualised 2.8% in the final

quarter of last year on robust business expenditure and

consumption, shoring up the BOJ's case for more rate hikes.

Annual wholesale inflation jumped to a seven-month high of

4.2% in January and accelerated for the fifth straight month,

highlighting persistent price pressures.

A private sector survey showed most economists projecting

the next hike to come in the latter half of this year.