Japan's core consumer inflation accelerated for a second straight month in July, reinforcing expectations that the Bank of Japan will raise interest rates at its September policy meeting.
The core consumer price index, which excludes fresh food, rose 1.8% from a year earlier, matching analyst forecasts and up from 1.6% in June. The increase reflects companies passing on higher import costs stemming from a weaker yen and the economic impact of the U.S.-Israel conflict with Iran.
The data, released Friday, will factor into the BOJ's decision at its next rate-setting meeting on September 17-18. A majority of economists anticipate a 25-basis-point increase in the benchmark rate from 1% to 1.25%.
Despite the pickup, Japan's core inflation has remained below the BOJ's 2% target for seven consecutive months, partly due to government subsidies that have capped fuel costs. A narrower measure, which also excludes energy prices and is considered a more reliable gauge of underlying inflation, climbed to 1.9% in July from 1.7% in June.
Analysts expect inflation to exceed the BOJ's target in the coming months as the pass-through of higher commodity costs continues, a trend already reflected in elevated producer prices. The central bank raised rates in June to a 31-year high of 1% but held policy steady in July while issuing one of its strongest warnings to date about rising inflation risks.
