Investing.com– The Japanese yen hit its highest level against the dollar in just over a month on Friday as stronger-than-expected inflation data from Tokyo boosted expectations for a December interest rate hike by the Bank of Japan.

The yen pair, which measures the amount of yen needed to buy one dollar, fell about 1% to just 150.01 yen, its lowest level since tardy October.

The pair’s decline came after stronger-than-expected readings from Tokyo for November.

This reading serves as a guiding factor for nationwide inflation and incorporates expectations that steady inflation will maintain the BOJ’s hawkish stance in the coming months.

A recent Reuters poll showed that investors favor the BOJ raising interest rates by 25 basis points in December. BOJ Governor Kazuo Ueda also recently reiterated the central bank’s plans to raise interest rates further, citing a “positive cycle” of higher wages and steady inflation.

“Accelerating inflation combined with a solid recovery in monthly activity increases the likelihood of another BoJ rate hike in December,” ING analysts wrote in a note.

The December enhance will be the BOJ’s third hike in 2024, as the central bank ends nearly a decade of negative interest rates and begins tightening policy. The bank’s moves were largely driven by pointed wage growth this year, which boosted private spending and inflation.

UBS analysts said in a recent note that they expect wages to continue to rise in Japan in 2025, which could herald further interest rate increases by the BoJ. The central bank is also expected to support the yen, which was weakened in November by a much stronger dollar.

Japanese stock markets retreated amid the prospect of high interest rates. It was down 0.7% on Friday and down 0.6%.