Japan Core Inflation Rises to 1.8%, Fueling Rate Hike Expectations

Japan's core inflation accelerated in July to 1.8% from a year earlier, matching expectations and bolstering the case for a rate hike from the Bank of Japan (BOJ).

The data released on August 21 showed that firms are passing on rising import costs due to a weak yen and the US-Israeli war on Iran, which is driving up crude oil prices.

The core consumer price index (CPI) has been below the BOJ's 2% target for seven straight months, but analysts expect it to accelerate above this threshold in coming months.

Senior economist Masato Koike said that 'core consumer inflation is likely to re-accelerate' due to renewed tension in the Middle East and a weak yen.

The BOJ's next policy meeting on September 17-18 will be crucial, as the central bank is widely expected to raise rates to 1.25% from 1%.