Japan Inflation Hits 1.9%, Energy Prices Rise Despite Subsidies

Japan's headline inflation rate reached 1.9% in July, its highest level this year, due to rising energy costs. Energy prices have increased for the first time since November 2025 despite government subsidies.

The higher oil costs linked to the conflict in the Middle East contributed to the increase. Wholesale inflation also rose to 7.2% in July, with electricity charges being the largest contributor.

Fresh food prices increased by 7% from a year earlier, accelerating from a 3.9% rise in June. The 'core-core' inflation rate, which excludes both fresh food and energy, came in at 1.9%.

The Bank of Japan said that core inflation is likely to accelerate above 2% from the second half of fiscal 2026, citing wage increases being passed into selling prices, higher crude oil prices, and the yen's depreciation.