Japan Core Inflation Hits Six-Month High in July

Japan's core consumer price index, which excludes fresh food, rose 1.8% year-on-year in July. This figure marks a six-month high and an acceleration from the 1.6% increase recorded in June. The rise was driven by a weak yen and higher import costs resulting from Middle East tensions, specifically the US-Israeli war on Iran.

The core-core CPI, which strips out both fresh food and energy, rose to 1.9%. While government fuel subsidies have kept overall inflation below the 2% target of the Bank of Japan, the upward trend has shifted market expectations. Pricing for a rate hike at the September 17-18 policy meeting has climbed to approximately 80%, with analysts anticipating the policy rate will rise from 1% to 1.25%.

Reports indicate the administration of Sanae Takaichi supports early monetary tightening. This stance is intended to sustain the effects of coordinated foreign exchange interventions conducted with the United States and may help stabilize Japanese Government Bond yields.