Japan's core consumer prices rose 1.8% in July from a year earlier, matching the median forecast and holding steady from June's 1.6% increase, government data showed on Thursday.
The core Consumer Price Index, which excludes fresh food but includes fuel, remained below the Bank of Japan's 2% target for a seventh straight month. Underlying inflation, excluding both fresh food and energy, climbed 1.9% in July, up from 1.7% in June.
Goods prices accelerated to a 2.7% year-on-year gain, while service-sector inflation ticked up to 1.2% from 1.1% in June. Wholesale prices surged 7.2% over the same period, underscoring persistent cost pressures in the economy.
The Bank of Japan raised its benchmark rate to a 31-year high of 1% in June and is widely expected to deliver another hike at its September 17-18 policy meeting.
Analysts say rising geopolitical risks in the Middle East could further stoke inflation by lifting crude oil prices, while a weaker yen continues to amplify import costs. "Core consumer inflation is likely to re-accelerate given renewed tension in the Middle East, which will push up crude oil prices and add to price pressures from a weak yen," said Masato Koike, senior economist at Sompo Institute Plus.
Companies are also passing on higher costs more aggressively than in previous cycles, according to Taro Saito, economist at NLI Research Institute. "We expect core consumer inflation to accelerate above 2% around autumn and exceed 3% toward the March 2027 end of the current fiscal year," Saito added.
