TOKYO (BLOOMBERG) - Japanese inflation unexpectedly sped up in November but prices are still rising at less than half the rate targeted by central bank.

Core consumer prices, which exclude fresh food, increased 0.9 per cent in November from a year earlier against a forceast for a 0.8 per cent rise.

In other data releases on Tuesday (Dec 26), the unemployment rate fell to 2.7 per cent while household spending increased 1.7 per cent from a year ago. The job-to-applicant ratio rose to 1.56, the highest since the mid-1970s.

Nearly five years since Prime Minister Shinzo Abe returned to power promising to end Japan's deflationary malaise, the economy is registering healthy growth but inflation remains well below the Bank of Japan's 2 per cent target. Energy prices have driven most of the gains in inflation as the tightest labour market in decades hasn't fueled a strong rise in wages, meaning households have limited their spending. Given these conditions, the Bank of Japan left the settings on its unprecedented monetary stimulus programme unchanged last week in its final meeting of 2017.

Higher oil prices probably added upward pressure on the core CPI gauge, while declines in mobile phone charges and utility costs pushed the other way, Bloomberg Economics' Yuki Masujima said before the release. Looking forward, the positive output gap and higher oil prices are stoking inflationary pressures. Even so, inflation expectations remain muted. The job market is likely to remain tight, pressured by the expanding economy, declining working-age population, and mismatches between demand and supply of workers.

Overall, nationwide prices rose 0.6 per cent in November. Excluding fresh food and energy, prices gained 0.3 per cent in line with predictions.