Japan Core Inflation Rises, But Lags Central Bank Target Again

Japan's core inflation has accelerated in June, but still remains below the central bank's target of 2 percent for a fifth consecutive month. The core consumer price index rose 1.6 percent in June from 2025, matching market expectations and increasing from a 1.4 percent rise in May.

The acceleration is largely due to the base effect of a sharp fall in petrol prices in 2025 caused by government subsidies. However, food inflation moderated due to slumping rice prices, while service inflation slowed to 1.2 percent from 1.4 percent in May despite steady wage gains.

Analysts expect consumer inflation to pick up pace later this year as producer price increases driven by rising fuel and import costs filter through the economy. The yen's slide to a four-decade low is expected to add to inflationary pressure, keeping alive market expectations of further interest rate hikes by the Bank of Japan.