Japan's Inflation Resumes Upward Trend as Yen Hits New Low

Japan's core inflation indicator has resumed its upward trend after a three-month pause in June. The country's consumer price index (CPI), excluding fresh food, rose by 1.6% year-on-year, matching economists' median forecast.

The 'core-core CPI', which strips out both fresh food and energy, climbed to 1.7%, the same pace as the overall CPI. Energy costs are driving inflation, but government subsidies have kept prices in negative territory compared to last month.

Despite the Bank of Japan's interest rate hike last month to its highest level since 1995, market expectations still point to further rate hikes later this year. The yen has broken below the 164 mark against the US dollar for the first time since 1986, exacerbating inflation concerns and import costs.

Taro Saito, director of economic research at NLI Research Institute, noted that while there's no urgency for a sharp rate hike, the recent yen depreciation may force the central bank to act sooner rather than later. A survey found that half of Bank of Japan watchers expect the next rate hike in December, with 40% predicting an increase in October.