Inflation in Tokyo picked up for a second consecutive month in December, fueling expectations that the Bank of Japan (BOJ) may raise interest rates next year. Consumer prices, excluding fresh food, rose by 2.4%, up from 2.2% in November, according to the Ministry of Internal Affairs. Tokyo’s inflation data is seen as a leading indicator for national trends.

The labor market remained tight in November, with the jobless rate holding steady at 2.5%. Meanwhile, factory output showed a smaller-than-expected decline after strong gains in the previous months, and retail sales surpassed forecasts. These figures indicate that Japan's economy is recovering at a slow but steady pace, with a solid inflation trend.

Energy prices were a key driver behind the inflation, rising 13.5% as government subsidies for gas and electricity bills were phased out. This was the highest increase since August, although slightly below economists' expectations. The government plans to reinstate these subsidies from January through March, which may distort future inflation data.

Despite the uptick in inflation, a broader measure of price trends excluding energy showed a slower pace of increase at 1.8%, suggesting that Japan is not facing an immediate inflation crisis. The weak yen, hovering around 157.55 against the dollar, could further stoke inflationary pressures by raising import costs.