Japan's Core Inflation Accelerates, but Remains Below BOJ Target

Japan's core inflation rate accelerated in June but remained below the Bank of Japan's 2% target for the fifth consecutive month. The core consumer price index (CPI), which excludes volatile fresh food prices, rose 1.6% in June from a year earlier, matching market expectations and accelerating from May's 1.4% increase.

The acceleration was partly due to the base effect of last year's sharp fall in gasoline prices caused by government subsidies. Food inflation moderated due to slumping rice prices, while service inflation slowed to 1.2% from 1.4% in May despite steady gains in wages.

Wholesale inflation accelerated in June at its fastest pace in more than three years, with the producer price index surging 7.1%. The Bank of Japan raised interest rates to a 31-year high in June and is expected to keep them steady at its next policy meeting, despite concerns about upside risks to inflation.

Analysts say the recent surge in producer prices, driven by rising fuel and import costs from the Middle East conflict and the weak yen, will likely filter through the broader economy and accelerate consumer inflation later this year. The yen's slide to a four-decade low is also expected to add to inflationary pressure.