Asian markets follow Wall St lower on inflation worries

BANGKOK (AP) — Shares declined in Asia on Friday after a retreat on Wall Street driven by fears that strong economic data will lead the Federal Reserve to double down on its interest rate hikes to tame inflation.

Shanghai was flat while other major indexes declined. U.S. futures edged higher and oil prices rose. Trading was winding down with the approach of Christmas and New Year holidays.

Japan reported its core inflation rate, excluding volatile fresh foods, rose to 3.7% in November, the highest level since 1981, as surging costs for oil and other commodities added to upward price pressures in the world's third-largest economy.

While the rate was much lower than in the U.S. and most major European and emerging economies, it adds to pressure on the Bank of Japan to adjust its own policies that have kept interest rates ultra-low to spur growth. For Japan, deflation — falling prices — rather than inflation has been the key concern for most of the past few decades. Recession in coming months remains the greater concern, economists say.

“Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023," Capital Economics economist Marcel Thieliant said in a report.

The Fed has already hiked its key overnight rate to its highest level in 15 years. It began the year at a record low of near zero. Many economists and investors expect a recession to hit the U.S. economy in 2023.

Tokyo's Nikkei 225 index lost 1% to 26,235.25 and the Hang Seng in Hong Kong shed 0.4% to 19,602.11. The Shanghai Composite index dropped 0.4% to 3,043.56 and Australia's S&P/ASX 200 declined 0.6% to 7,107.70.

In Seoul, the Kospi dropped 1.8% to 2,313.69. Shares also fell in Bangkok, Mumbai and...