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.

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.

Japan's headline inflation rate slipped to 2.3% in October, its lowest level since January and down from the 2.5% seen in September. The core inflation rate fell to 2.3% from 2.4%, slightly higher compared to the 2.

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.

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.