Japan's core inflation holds near BOJ's target

Japan's core inflation held near the Bank of Japan's target last month, data revealed on Friday (Sep 18) ahead of a central bank meeting expected to discuss an interest rate hike. Core inflation dropped to 1.7 percent in August, from 1.8 percent, but remains close to the 2 percent target set by the BoJ. The government support for gasoline and electricity fees helped to slow the pace of inflation, according to the official data from the Ministry of Internal Affairs and Communications.

Energy and gas prices surged recently due to the Middle East crisis, which shows no signs of ending soon. Oil prices have once again exceeded US$100 a barrel, and Japan, resource-poor, is extremely dependent on oil imports. Inflation remained stable in August, but higher energy costs are expected to push it above the BoJ's 2 percent target soon.

Some BoJ members have hinted at raising the key rate by 0.25 percentage points to 1.25 percent, the highest level in over three decades, due to the rising inflationary pressure.