Japan's annual wholesale inflation held steady at 3.8% in December on stubbornly high food costs, data showed on Thursday, highlighting persistent price pressures that may prod the central bank to raise interest rates next week.

The Bank of Japan is expected to raise interest rates at its January meeting as inflation pressures intensify, setting the stage for significant market reactions.

Governor Kazuo Ueda yesterday joined his deputy in raising market expectations of a potential interest rate hike next week, boosting the yen and signaling the central bank is doing its utmost to avoid a global market crash that followed the rate hike in July last year.

Bank of Japan Governor Kazuo Ueda said on Thursday the central bank will debate next week whether to raise interest rates, based on its fresh quarterly growth and inflation forecasts. In remarks made at a meeting with regional bank executives,