# Japan's Core Inflation Rate Increases Due to Higher Oil Prices and Weak Yen

*Japan's core inflation increased in June due to higher oil prices and a declining yen, according to recent official data.*

July 24, 2026 · business

Japan's core inflation rate accelerated in June, driven by higher oil prices and a weak yen, according to official data released on Friday. The core inflation rate, which excludes food prices, rose to 1.6 percent in June from 1.4 percent in May, meeting market expectations. The internal affairs ministry attributed the rise to increased costs of imported energy products, exacerbated by the Middle East conflict and the resultant blockage of the Strait of Hormuz. Additionally, the yen's depreciation to a four-decade low against the US dollar has increased the cost of imports for resource-scarce Japan.

Prime Minister Sanae Takaichi has implemented fuel and energy subsidies to protect consumers from the sharp increase in oil prices resulting from the Middle East conflict. Excluding food and energy prices, inflation slightly decreased to 1.7 percent from 1.8 percent in May, just below market consensus. Unadjusted inflation was 1.7 percent after 1.5 percent in May, aligning with market expectations.

Japan's core inflation has remained below the Bank of Japan's (BoJ) two-percent target for five consecutive months. The central bank raised interest rates to a 31-year high in June. While the BoJ is expected to maintain current interest rates at its next meeting on July 31, most economists predict a hike in December. The European Central Bank kept rates unchanged but hinted at a potential rise in September due to escalating Middle East tensions.

Brent crude oil prices surged above $100 a barrel as Iran-backed Houthi rebels targeted Red Sea shipping, potentially opening a new front in the Middle East conflict. Marcel Thieliant at Capital Economics anticipates Japan's inflation to climb above three percent by early 2027. The weakening yen, influenced by the interest rate differential between Japan and other major economies, continues to put downward pressure on the currency.

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Source: https://pulsetoday.com.bd/en/business/japan-inflation-rises-oil-prices-weak-yen