Japan Core Inflation Hits 1.8% Amid Middle East Energy Costs

Japan's core consumer inflation accelerated in July to 1.8% from a year earlier, according to a Reuters poll of economists. The increase was driven by faster food price gains and higher energy costs due to the ongoing war in the Middle East.

The Bank of Japan is likely to consider this data when making its decision on interest rates in September. The market expects an interest rate hike at that time, which would be a response to rising inflationary pressures.

Despite the increase in core consumer prices, many economists believe that some of the factors driving inflation are one-time jumps, such as tariffs and oil price shocks. If these underlying drivers can be addressed, inflation could return to the Bank of Japan's 2% target.