(RTTNews) - Japan's core inflation edged up in July as expected on higher energy prices but underlying inflation fell below the 2 percent target for the first time since 2022, adding uncertainty over another interest rate hike from the Bank of Japan.
Core inflation that excludes prices of fresh food rose marginally to 2.7 percent in July from 2.6 percent in June, the Ministry of Internal Affairs and Communications said Friday. The rate came in line with expectations.
The increase was largely driven by the 12.0 percent surge in energy prices. The temporary phasing out of energy subsidies pushed up household utility bills in July.
Meanwhile, underlying inflation that strips out fresh food and energy prices, eased to 1.9 percent from 2.2 percent from a month ago. This was the weakest since September 2022.
Headline inflation held steady at 2.8 percent in July. On a monthly basis, consumer prices gained 0.2 percent after rising 0.3 percent in June.
In July, the BoJ unexpectedly raised its benchmark rate and also outlined its tapering plans. Following the announcement, Governor Kazuo Ueda said the bank will continue to raise interest rates if the economy and prices move in line with the projection. He also said that 0.5 percent may not act as a key barrier when raising rates.
Capital Economics' economist Marcel Thieliant said the July inflation figures clearly diminish the case for further tightening.
