Japan's inflation accelerated in July, strengthening expectations for tightening monetary policy

Japan's official data showed today that war in the Middle East and a weak yen have pushed up prices, with Japan's inflation accelerating in July, reinforcing expectations that Japan's monetary policy may be tightened.

According to data from Japan's Ministry of Internal Affairs and Communications, the annual core inflation rate excluding food rose from 1.6% to 1.8%, in line with market expectations.

If energy prices are excluded, the inflation rate rose from 1.7% to 1.9%; the unadjusted inflation rate climbed from 1.6% to 1.9%, which is also in line with market views.

Although the depreciation of the yen is beneficial to large Japanese exporters such as Toyota and Sony, it has increased the cost of imported materials such as oil and food for resource-scarce Japan.

In order to protect consumers, Japanese Prime Minister Sanae Takaichi introduced fuel and energy subsidies in response to rising oil prices caused by the conflict in the Middle East.

The Bank of Japan has set its core inflation target at 2%. In June this year, it raised interest rates to a 31-year high, and outsiders are expected to raise interest rates again this year.

If the Bank of Japan decides to raise interest rates, it will cause the yen to strengthen.

Last month, the yen rose after a rare joint intervention by Japan and the United States in the currency market, but the yen has now given up most of its gains.

Bloomberg economic expert Taro Kimura pointed out: "The Bank of Japan believes that core inflation will reach the 2% target, and the July inflation data will further solidify this view. We expect the Bank of Japan to raise interest rates in October, from the current 1% to 1.25%."

Other data released on the 17th showed that Japan's economic growth rate in the second quarter slowed to 0.3% from 0.5% in the previous quarter.