Japan’s core August inflation slows to 1.7%

Core inflation in Japan slowed slightly to 1.7% in August, official data showed Friday, hours ahead of a central bank meeting where an interest rate hike is widely expected.

It remains close to the 2% target set by the Bank of Japan (BoJ), which is seeking to relieve inflationary pressure.

The reading from the internal affairs ministry, which excludes volatile fresh food prices, compared to 1.8% in July and lower than market expectations, which had forecast the figure to hold steady.

Government support for gasoline and electricity fees contributed to the slower pace of inflation, the official data showed.

Some BoJ members have sent signals suggesting they will raise its key rate by 0.25 percentage points to 1.25%, the highest level in more than three decades.

Pressure has increased on officials to lift borrowing costs as a spike in oil prices caused by the Middle East crisis, which shows little sign of ending anytime soon, is expected to keep putting upward pressure on inflation.

Meanwhile, the weak yen is also driving up the cost of imported goods.