Japan Inflation Accelerates, Boosting Hopes for BOJ Rate Hike

Japan's inflation accelerated for the second consecutive month in July, according to data released on August 21. Core Consumer Price Index (CPI) rose 1.8% year-over-year, matching economists' expectations and up from 1.6% in June.

The overall inflation rate climbed 1.9%, with core-core inflation, excluding fresh food and energy, also increasing to 1.9%. Higher energy costs, food prices, and dining-out expenses contributed to the increase, while government measures provided some relief.

Processed food prices rose 3%, despite rice prices falling nearly 12% following last year's sharp surge. The data adds to the case for further Bank of Japan policy normalization, particularly with Governor Kazuo Ueda signaling that the central bank could accelerate policy normalization.