TOKYO--Japan's consumer prices rose at a slightly faster pace in June, keeping the central bank on track for further interest-rate increases.
Consumer prices, excluding fresh food, climbed 1.6% in June from a year earlier, compared with May's 1.4% increase, government data showed Friday. The reading marked the first acceleration in the gauge in three months and matched the consensus forecast of economists polled by data provider Quick.
Oil and food costs have been the key factors affecting overall price trends. In June, energy prices fell much more slowly, declining 0.1%, as the effect of government gasoline subsidies a year earlier faded. Meanwhile, food inflation continued to soften, with rice prices falling further.
These prices are likely to continue facing mixed cues, including the situation in the Middle East, a weak yen, government energy subsidies, rising packaging costs, and planned food sales tax cuts, economists say.
The Bank of Japan raised its policy rate to a 31-year high of 1% last month as board members grew more concerned that higher oil prices would push the nation's underlying inflation above the central bank's 2% target.
BOJ policymakers have said the impact of the Middle East conflict and a subsequent oil surge will likely start appearing in consumer prices around the summer.
Capital Economics' Marcel Thieliant expects inflation to climb above 3% by early next year.
"The bank's concerns about upside risks to inflation won't have dissipated," with producer prices rising sharply in recent months, crude prices approaching their recent peaks, and the yen falling to fresh lows against the dollar, Thieliant said.
Others warn that inflation is squeezing households' purchasing power as prices are rising faster than their incomes.
"Price pressures still reflect supply-side factors more than an improvement in domestic demand," said Sarah Tan, an economist at Moody's Analytics.
"The concern is that nominal wage growth may not keep pace with inflation, which will weigh on real wages and dampen consumer spending," Tan said.
The central bank is scheduled to release fresh growth and inflation forecasts next week, when it is widely expected to keep interest rates on hold to examine the effects of its previous hike.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
(END) Dow Jones Newswires
July 23, 2026 21:01 ET (01:01 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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