Japan inflation accelerates in July

TOKYO

People looks at the fruits at a shop at the Tsukiji Outer Market in Tokyo. (AFP photo)

Inflation in Japan picked up last month as the Middle East war and a weak yen pushed up prices, official data showed on Aug. 21, reinforcing expectations for a tightening of monetary policy.

Core inflation excluding food accelerated to 1.8 percent from 1.6 percent, according to the internal affairs ministry, in line with market expectations.

Stripping out energy prices, inflation rose to 1.9 percent from 1.7 percent, also meeting consensus forecasts.

While helping big Japanese exporters like Toyota and Sony, a weak yen increases the cost of imports like oil and food for resource-poor Japan.

Prime Minister Sanae Takaichi has moved to shield consumers from the sharp rise in oil prices resulting from the Middle East conflict with fuel and energy subsidies.

The Bank of Japan, which has a 2 percent target for core inflation, hiked interest rates to a 31-year high in June and is expected to raise them again this year.

The currency has given up around half of its gains that followed a historic joint market intervention by the United States and Japan last month.

"The data should reinforce the BoJ's view that underlying inflation is securing its 2 percent target. Our baseline is for the B0J to raise rates to 1.25 percent from 1 percent in October," said Taro Kimura at Bloomberg Economics.

Other data released on Aug. 17 showed growth in the world's fourth-biggest economy slowing to 0.3 percent in the second quarter from 0.5 percent in the previous three months.

The weaker-than-expected GDP came after capital expenditure fell and missed market expectations, and flat private consumption against forecasts that it would grow.