A customer visits a store at Togoshi Ginza shopping street in Tokyo on January 23, 2025.\u00a0<\/p>\n
Philip Fong | Afp | Getty Images<\/p>\n
Japan’s core inflation<\/a> came in at 1.6% in June, as higher oil prices start to spill over into the wider economy. <\/p>\n This is the first rise in core inflation since March, and was in line with the 1.6% growth expected by economists polled by Reuters. Core inflation in Japan strips out prices of fresh food. <\/p>\n Headline inflation increased to 1.7% from May’s 1.5%, while the so-called “core-core” inflation rate, which strips out prices of fresh food and energy, dipped to 1.7%, the lowest since August 2022. <\/p>\n Cushioned by government subsidies, energy prices dipped just 0.1% year-on-year in June, compared with a 2.5% fall in May. Charges for fuel, light and water remained flat, ending 6 straight months of declines. <\/p>\n While Japan has rolled out subsidies to mitigate the impact of the global jump in energy prices for consumers, businesses have seen a sharp rise in costs due to the price spikes, with the producer price index for June<\/a> hitting 7.1%, highest level since March 2023.<\/p>\n Japan has been struggling with higher energy prices as the Middle East crisis has hit supplies, while historic weakness in the yen<\/a> has pushed up import costs. <\/p>\n Trade data released Wednesday<\/a> showed that petroleum imports by the country in terms of value surged by more than 59% year on year, as costs stay elevated. Japan meets over 87% of its energy needs via imports, according to the\u00a0International Energy Agency.<\/a><\/p>\n Weak yen has raised concerns that Japan will need to deal with higher imported inflation. Yen<\/a>, which has been trading at multi-decade lows, was flat at 163.82 against the dollar on Friday. The country’s benchmark Nikkei 225<\/a> stock index was 2.14% lower after the data release. <\/p>\n On Wednesday, Reuters, citing sources familiar with the Bank of Japan’s thinking, reported that<\/a> the central bank “remains on alert to upside inflation risks that could lead to faster interest rate hikes than markets \u200cproject.”<\/p>\n The report said some within the BOJ see a possibility to raise rates faster if price pressures from a weak yen and rising fuel costs from the Iran conflict push \u200bup inflation at a faster-than-expected pace.<\/p>\n