Annual core inflation in Japan’s capital accelerated in July, reinforcing expectations that the Bank of Japan (BOJ) could continue raising interest rates despite keeping policy unchanged for now.
Data released on Friday showed Tokyo’s core consumer price index (CPI), which excludes fresh food prices, rose 1.9% year-on-year in July, above the median market forecast of 1.7% and faster than the 1.6% increase recorded in June.
Although inflation remained below the BOJ’s 2% target for a sixth consecutive month, the increase reflected broader price pressures driven by higher food and daily necessity costs amid the ongoing Middle East conflict.
A separate measure excluding both fresh food and fuel, which the BOJ closely monitors as an indicator of underlying inflation, rose 2.0% in July from 1.9% in June.
Meanwhile, service-sector inflation remained unchanged at 1.1%, suggesting businesses were still cautious about passing rising labour costs on to consumers.
Separate government data showed Japan’s factory output increased in June, with manufacturers expecting production to rise further over the next two months, indicating the economy was coping with elevated oil prices and supply chain disruptions linked to the conflict in the Middle East.
The Tokyo inflation data, regarded as a leading indicator of nationwide price trends, comes as the BOJ is widely expected to leave its benchmark interest rate unchanged after raising it to a 31-year high of 1% in June.
The central bank has signalled that mounting inflationary pressures, fuelled by higher energy costs and a weak yen, could warrant further monetary tightening.
Reuters
