Japan core inflation rises to 1.8% in July

Japan's core inflation rate, excluding food, rose to 1.8% in July from 1.6% in June, official data showed Friday, adding pressure on policymakers as prices remain close to the Bank of Japan's target.

The internal affairs ministry said inflation excluding energy rose to 1.9% from 1.7%. The unadjusted inflation rate also rose to 1.9% from 1.6%.

A weak yen increases the cost of imports such as oil and food for resource-poor Japan, while helping major exporters including Toyota and Sony. Prime Minister Sanae Takaichi has used fuel and energy subsidies to shield consumers from higher oil prices linked to the Middle East conflict.

The Bank of Japan has a 2% target for core inflation and raised interest rates to a 31-year high in June. Bloomberg Economics economist Taro Kimura said the latest data should reinforce the central bank's view that underlying inflation is securing that target, and said Bloomberg Economics expects the Bank of Japan to raise rates to 1.25% from 1% in October.

Other data released Monday showed growth in Japan's economy slowed to 0.3% in the second quarter from 0.5% in the previous three months. Capital expenditure fell and private consumption was flat.

Takaichi's government has expanded support for consumers after a stimulus package in late 2025 and energy tax rebates. The government also said last month it would cut consumption tax on food products from 8% to 1% starting in April. Media reports said the cut would cost the government 10 trillion yen, or $63 billion, in lost tax revenue over two years.

The measures have added to concerns about Japan's public finances, with government debt at more than double annual economic output. Those concerns, along with expectations of a Bank of Japan rate increase, pushed yields on 10-year Japanese government bonds to their highest level since 1996 on Monday.