TOKYO - Japan's core consumer prices in June rose 1.6 percent from a year earlier, picking up from the previous month, driven by food costs due to rising raw material prices, while state subsidies for energy bills limited the upside, government data showed Friday.
The increase in the nationwide consumer price index, excluding volatile fresh food, followed a 1.4 percent rise in May and remained below 2 percent for the fifth consecutive month, according to the Ministry of Internal Affairs and Communications.
The result is among the data the Bank of Japan, which seeks to stably achieve 2 percent inflation, will scrutinize ahead of its policy meeting next week, where it is expected to keep the policy interest rate steady after raising it to a 31-year high of 1.00 percent at the previous meeting in June.
The central bank will also release fresh outlooks for prices and economic growth, with attention on how it will assess the risks of inflationary pressures stemming from the ongoing Middle East crisis and the disruptions of supplies of fuel and petroleum products.
Resource-poor Japan is vulnerable to rises in crude oil prices, while the weaker yen against the U.S. dollar may also contribute to raising import costs.
In the reporting month, prices for food, excluding fresh items, climbed 3.1 percent, decelerating from a 3.5 percent increase in May, as costs in raw materials led to hikes in prices of bento lunch boxes and chocolates.
Energy costs edged down 0.1 percent on the year, following a 2.5 percent drop in May, as gasoline prices sank 0.7 percent and electricity bills declined 1.7 percent, affected by the government's subsidy program aimed to help ease the burden of rising fuel costs due to the Middle East crisis.
A revision of the medical fee system also led to higher health care fees, while prices of household durable goods were higher.
Core-core CPI, which strips away both energy and fresh food to reflect underlying price trends, rose 1.7 percent in June.
Takeshi Minami, chief economist at the Norinchukin Research Institute, said he expects inflation to increase further from the fall onward due to renewed tensions in the Middle East. He anticipates inflation will rise above 2 percent during the July-September period and near 3 percent during the second half of the fiscal year ending in March.
"The BOJ has signaled an intention to continue rate hikes...and taking into account that it expects 'underlying inflation' to rise to around 2 percent from the latter half of fiscal 2026 and fiscal 2027, there is a sufficient possibility that it will decide on another rate hike by the end of this year," Minami said.
