Japan’s core consumer price index (CPI) — which excludes fresh food but includes energy — rose 1.8% year-on-year in July 2026, after a 1.6% increase in June. This was the highest core inflation rate since March and was broadly in line with market expectations. However, it remained below the Bank of Japan’s 2% target for the sixth consecutive month, as government fuel subsidies helped counter upward price pressures from higher oil costs related to the conflict in the Middle East.
Meanwhile, the CPI measure that excludes both fresh food and fuel — a gauge closely monitored by the Bank of Japan as a better indicator of demand-driven inflation — climbed 1.9% year-on-year in July. That marked the fastest increase in three months, following June’s reading, which was the weakest since August 2022.
At its July meeting, the Bank of Japan kept its benchmark interest rate unchanged at 1.0%, the highest level since September 1995. This followed a 25-basis-point hike in June, aimed at preventing higher oil prices from stoking broader inflationary pressures.
