Core inflation in Tokyo accelerates as energy-driven price pressures begin to broaden
FILE PHOTO: People walk at a shopping district in Tokyo, Japan, June 16, 2026. REUTERS/Kim Kyung-Hoon/File Photo
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TOKYO, June 26 : Annual core inflation in Japan’s capital accelerated in June, data showed on Friday, a sign of broadening price pressures from the Middle East conflict that keeps the central bank on track to consider further raise interest rates.
“The impact of the Middle East situation is spreading primarily through energy, with a rise in crude oil prices since around February gradually feeding through to electricity and gas costs,” said Kanako Nakamura, economist at Daiwa Institute of Research.
The data will be among the factors the Bank of Japan will scrutinise at next month’s policy meeting, when the board will conduct a quarterly review of growth and price forecasts.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 1.6 per cent in June from a year earlier, data showed, matching a median market forecast. It accelerated from a gain of 1.3 per cent in May, while staying below the BOJ’s target of 2 per cent for the fifth month.
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An index stripping away the effect of fresh food and fuel, which is closely watched by the BOJ as a better gauge of trend inflation, rose 1.9 per cent in June after a gain of 1.6 per cent in May.
“The key issue has been the timing and extent of pass-through into trend inflation,” Daiwa’s Nakamura said. “The pick-up in the trend inflation this month suggests that price pressures are beginning to spread beyond energy to non-energy items such as food.”
While the peace deal between the U.S. and Iran eased market fears over global inflationary pressures, wholesale inflation spiked to a three-year high of 6.3 per cent in May in a sign companies were already passing on higher costs from the energy shock.
But Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo, said he doubts whether energy-driven price pressures would push core inflation to as high as 3 per cent as the BOJ expects, when inflation concerns are easing in the United States and Europe.
“The BOJ may be overly cautious about inflation risks,” he said.
The Middle East conflict has complicated the BOJ’s decision on the timing and pace of rate hikes, as higher energy costs fuel inflation while simultaneously squeezing an economy heavily dependent on oil imports.
The BOJ raised interest rates to a 31-year high this month in a landmark step in its policy normalisation, signalling readiness to tighten further as it focuses on taming price pressures from the energy shock induced by the Iran war.
Source: Reuters
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