Japanese inflation edges closer to BOJ 2% target.

Japanese core inflation, which excludes food prices, edged up to a fresh five-year high of 1.3% on year in December from +1.2% in November and topped consensus of 1.2%. Overall inflation increased to 1.6% from 1.5%. While CPI is heading towards the Bank of Japan's target of 2%, the government wants businesses to increase wages in order to solidify the rise in inflation, the test of which will come in Spring wage negotiations. There are also concerns about the impact of an increase in sales tax in April.

Japan's unemployment rate dropped to the lowest since December 2007, falling to 3.7% last month from 4% in November and vs forecasts of 3.9%. The number of positions for every person looking for a job rose to 1.03, passing one for the first time since October 2007. Industrial production recovered with a rise of 1.1% on month vs -0.1% previously.