Bank of Japan Governor Kazuo Ueda revealed in an exclusive interview with Nikkei newspaper that the central bank will base whether to hike interest rates on critical economic indicators, particularly wage and inflation data.

A pick up in consumer prices in Tokyo, retail sales and industrial production signal a steady economic improvement ahead of December’s closely watched Bank of Japan policy meeting.

The Bank of Japan is watching service-sector inflation for clues on whether demand-driven price gains are broadening enough to justify further raising interest rates.

The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was making steady progress towards durably achieving its 2% inflation target. Governor Ueda has said the BOJ will keep raising rates if inflation remains on track to stably hit 2% as it projects.

Consumer prices, excluding fresh food, for the Tokyo metropolitan area rose 2.2% in November from a year earlier, marking the first acceleration in the pace of inflation in three months.

A leading indicator of Japan's service-sector inflation held steady near 3% in October, data showed on Tuesday, reinforcing the central bank's view that rising wages are prodding more firms to pass on higher labour costs through price hikes.