BOJ Eyes Rate Hike Amid Rising Core Inflation

Japan's core inflation rate rose to 1.8% in July, exceeding market expectations and signaling that the country's central bank may raise interest rates as early as September.

The Bank of Japan (BOJ) is expected to consider a rate hike at its upcoming policy meeting on September 17-18, with analysts anticipating an increase from the current 1%. The decision comes amid concerns over rising inflation, driven by higher import costs due to a weakened yen and the ongoing conflict in the Middle East.

According to data released on August 21, core consumer prices advanced 1.8% year-on-year in July, matching the consensus projection. This is the seventh consecutive month that core inflation has remained below the BOJ's 2% target, largely due to government assistance programs aimed at reducing fuel expenses.

Analysts predict that core inflation will surpass the BOJ's threshold in the near term as input costs continue to pass through to consumers. Taro Saito, an economist at NLI Research Institute, forecasts that core consumer prices will exceed 2% by autumn and reach over 3% by March 2027.