Japan's Core Inflation Accelerates on Higher Oil Prices, Weak Yen
Japan's core inflation accelerated in June to 1.6%, according to official data released on Friday, as higher oil prices and a weak yen pushed up consumer costs.
The internal affairs ministry blamed the Middle East war for driving up energy import costs, which in turn affect other product prices. A falling yen also increases the cost of imports like oil and food for resource-poor Japan.
Prime Minister Sanae Takaichi has taken steps to shield consumers from the sharp rise in oil prices with fuel and energy subsidies.
The data showed that excluding food and energy prices, inflation eased to 1.7% from 1.8% in May, just below market consensus of 1.8%. Unadjusted, inflation was 1.7% after 1.5% in May and in line with market expectations.
The Bank of Japan is widely expected to keep interest rates unchanged at its next meeting on July 31 but most economists predict a hike in December. Brent crude surged back above $100 a barrel as Iran-backed Houthi rebels targeted Red Sea shipping, potentially opening a new front in the Middle East war.
Marcel Thieliant at Capital Economics expects inflation in Japan to climb above three percent by early 2027, citing crude oil prices approaching recent peaks and the yen falling to fresh lows against the US dollar.