The increase, which was the fastest pace in four decades, will likely underpin market expectations the Bank of Japan (BOJ) may phase out its massive stimulus by tweaking its yield control policy.
The rise in the Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel, exceeded a median market forecast of 3.8% and a 3.6% gain seen in November, government data showed on Tuesday.
The last time Tokyo inflation was faster was April 1982, when the core CPI was 4.2% higher than a year before.
The Tokyo core-core CPI index, which excludes fuel as well as fresh food, was 2.7% higher in December than a year earlier, picking up from the 2.5% annual gain seen in November.
The rise in Tokyo CPI heightens the chance nationwide consumer inflation likely stayed above the BOJ's 2% target in December.
BOJ Governor Haruhiko Kuroda has dismissed the chance of a near-term interest rate hike on the view the bank must keep supporting the economy until the current cost-push inflation turns into a demand-driven one accompanied by higher wages.
But Japan's long-term interest rates have crept up since the BOJ stunned markets last month by widening the band around its 10-year bond yield target, a move investors saw as a prelude to a future rate hike.
(Reporting by Leika Kihara and Yoshifumi Takemoto; Editing by Lincoln Feast.)
By Leika Kihara and Yoshifumi Takemoto
