Japan Inflation Surges as Yen Weakness Pushes Up Import Costs

Inflation in Japan accelerated to 1.8 percent in July, according to official data released by the internal affairs ministry, exceeding market expectations. The core inflation rate, excluding food prices, reached 1.9 percent from 1.7 percent.

The weak yen has pushed up import costs for resource-poor Japan, while a rise in oil prices due to the Middle East conflict has led to fuel and energy subsidies by Prime Minister Sanae Takaichi's government.

Market analysts expect the Bank of Japan (BoJ) to raise interest rates again this year, with Bloomberg Economics predicting a hike to 1.25 percent from 1 percent in October.

The BoJ has maintained a two-percent target for core inflation and hiked interest rates to a 31-year high in June. A rate increase could lift the yen, which has lost around half of its gains following a historic joint market intervention by the US and Japan last month.