The inflation rate closely monitored by the Bank of Japan has hit its highest level in seven months

Japan's inflation rate, closely watched by the Bank of Japan (BOJ), hit a seven-month high in November, which could prompt the central bank to raise interest rates early next year.

The so-called “core” inflation rate, which excludes fresh food and energy prices and is monitored by the Bank of Japan, increased to 2.4% from 2.3%highest level since April.

The core inflation rate – which excludes fresh food prices – was 2.7%, down from the 2.3% recorded in October and above the 2.6% forecast of economists polled by Reuters.

Headline inflation rose to 2.9% from 2.3%, reaching the highest level since August.

The readings appear the day after The Bank of Japan kept interest rates constant at 0.25%, surprising economists who expected a 25 basis point increase.

In its statement Thursday, the BoJ said the decision to uphold was an 8-to-1 split decision, with board member Naoki Tamura favoring a 25-basis-point increase.

Tamura believed that the risk of inflation had shifted upwards and proposed that the bank raise interest rates during the meeting.

BOJ Governor Kazuo Ueda reportedly said at a press conference on Thursday that since core inflation is rising only at a “moderate pace,” the BOJ may raise interest rates slowly, he said.

Ueda added, however, that the central bank was aware that if it waited too long to increase interest rates, it would have to accelerate increases at future meetings,

The BOJ “will soon resume its monetary tightening cycle,” Marcel Thieliant, head of the Asia-Pacific region at Capital Economics, said in a statement after the decision. Capital Economics expects a hike in January after releasing a new set of economic forecasts.

Thieliant added that “it is worth noting that, unlike in October, the decision to leave interest rates unchanged was not unanimous,” pointing to Tamura's vote to raise rates to 0.5%.