Data released on Friday indicated that the year-on-year growth rate of core inflation in Japan's capital, Tokyo, picked up in June, as price pressures stemming from Middle East conflicts continue to spread.
This data will serve as a key reference for the Bank of Japan's policy meeting next month, during which the central bank's board will conduct its quarterly assessment of economic growth and price expectations.
The figures show that Tokyo's core consumer price index (CPI), which excludes volatile fresh food prices, rose 1.6% year-on-year in June, up from a 1.3% increase in May and matching the median market forecast of 1.6%.
Another price indicator, which excludes both fresh food and fuel costs and is closely monitored by the Bank of Japan as a core reference for gauging medium- to long-term inflation trends, rose 1.9% year-on-year in June, compared to a 1.6% increase in May.
The Middle East conflicts are complicating the Bank of Japan's judgment on the timing and pace of interest rate hikes: rising energy prices push inflation higher, but as Japan's economy is heavily reliant on crude oil imports, higher oil prices simultaneously suppress domestic economic activity.
This month, the Bank of Japan completed an interest rate hike, bringing rates to their highest level in 31 years, a landmark move in its monetary policy normalization process. The central bank has signaled its readiness to further tighten monetary policy, focusing on curbing price pressures arising from energy shocks triggered by the conflict involving Iran.
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