Tokyo core CPI rose 1.9% YoY in July versus market est. 1.8%, Ministry of
Internal Affairs and Communications data showed; core-core CPI (ex fresh food
and energy) rose 2.0% and overall CPI rose 2.0%. The acceleration — driven by a
narrowing decline in electricity and gas costs and steady rises in processed
food prices, despite a larger gasoline price drop after government measures —
strengthens the case for the Bank of Japan to consider another rate hike in
coming months, even as markets largely expect a hold today (31st). Takeshi
Minami, chief economist at the Norinchukin Research Institute, said ongoing
Middle East tensions could keep energy-related prices higher and push up food
and other costs, meaning inflation may remain above 2% from this autumn.
