Japan Core Inflation Rate Hits 6-Month High

Japan’s core consumer price index, which excludes fresh food but includes energy, increased 1.8% year-on-year in July 2026, following a 1.6% rise in June. It was the highest core inflation rate since January, in line with market forecasts. Still, the latest reading remained below the Bank of Japan’s 2% target for a seventh straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which the Bank of Japan closely watches as a better gauge of demand-driven price movements, climbed 1.9% year-on-year in July, marking the fastest increase in three months after posting the softest increase since August 2022 at 1.7% in June. The BoJ left interest rates at 1.0% at its July meeting, remaining at their highest level since September 1995, following a 25-bps hike in June to prevent higher oil prices from fueling inflation.

Japan’s core consumer price index, which excludes fresh food but includes energy, increased 1.6% year-on-year in June 2026, following a 1.4% rise in May, which was the lowest level since March 2022. It was the highest core inflation rate since March and was in line with market forecasts of 1.6%. Still, the latest reading remained below the Bank of Japan’s 2% target for a fifth straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which is closely watched by the Bank of Japan as a better gauge of demand-driven price movements, rose 1.7% year-on-year in June, marking the softest increase since August 2022. The BoJ raised interest rates by 25 bps to their highest level since September 1995 at its June meeting, marking the first rate hike since last December, to prevent higher oil prices from fueling inflation.

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.4% year-on-year in May 2026, in line with both the previous figure and market forecasts. Still, the latest reading marked the lowest level since March 2022 and remained below the Bank of Japan’s 2% target for a fourth straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which is closely watched by the Bank of Japan as a better gauge of demand-driven price movements, rose 1.8% year-on-year in May, marking the softest increase since September 2022. The BoJ raised interest rates by 25 bps to their highest level since September 1995 at its June meeting, marking the first rate hike since last December, to prevent higher oil prices from fueling inflation.