Japan’s inflation picks up, backing BOJ’s case for rate hike

Prime Minister Sanae Takaichi’s Cabinet earlier this month approved a plan to cut the sales tax on food for two years starting in April, which will add another complication to the Bank of Japan’s efforts to assess underlying inflation. | BLOOMBERG

Aug 21, 2026

Japan’s key price gauge accelerated for a second month in July, keeping the Bank of Japan on track for another near-term interest rate hike as market speculation builds over a move as soon as September.

The consumer price index excluding fresh food rose 1.8% last month from a year earlier, the Ministry of Internal Affairs and Communications said Friday, picking up from a 1.6% advance in the previous month. The reading, the fastest since January, matched the median economist estimate.

The index that strips out both fresh food and energy, a measure closely watched by the BOJ as a gauge of underlying inflation, advanced 1.9%. The overall CPI also rose 1.9%.

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