Japan's Core Inflation Stays Below Target Amid Rising Producer Prices

Japan's core inflation rose to 1.6% in June, according to data released on Friday, but remained below the Bank of Japan's target for a fifth straight month.

The core consumer price index (CPI) accelerated from a 1.4% increase in May due partly to the base effect of last year's sharp fall in gasoline prices caused by government subsidies.

However, analysts expect consumer inflation to accelerate later this year as producer prices surge, driven by rising fuel and import costs from the Middle East conflict and the weak yen.

The yen's slide to a four-decade low is likely to add to inflationary pressure, keeping alive market expectations of further interest rate hikes by the Bank of Japan.