Tokyo CPI eased in December but stayed above target, BOJ to stay on gradual rate hike path

Tokyo's core CPI rose 2.3% year-on-year in December, down from 2.8% in November, driven by lower energy and utility costs. The core-core CPI eased to 2.6%, also above BOJ's 2% target. Headline CPI decreased to 2.0%, marking the first clear deceleration since August. Despite the slowdown, the figures suggest persistent underlying price pressures, supporting the BOJ's path to gradual policy normalization. Last week, the BOJ raised its policy rate to 0.75%, the highest level in around three decades. Market expectations for additional rate hikes remain, though the softer data reduces immediate urgency for action. Yen may experience modest softness in the near term but sustained inflation limits scope for depreciation. Overall, equities may be supported by reduced immediate tightening risks.