Japan’s core August inflation slows to 1.7%

Japan's core inflation decelerated to 1.7% in August, according to official data released on Friday, just before a central bank meeting where an interest rate hike is anticipated. This figure remains in close proximity to the 2% target established by the Bank of Japan (BoJ), which aims to alleviate inflationary pressures. The data, compiled by Japan's internal affairs ministry, excludes volatile fresh food prices and represents a slight decrease from 1.8% in July, as well as being lower than market forecasts which had anticipated the rate would remain stable.

The reduction in inflation can be attributed to government support measures for gasoline and electricity fees, as per the official data. However, some Bank of Japan members have indicated their willingness to raise the key interest rate by 0.25 percentage points to 1.25%, marking the highest level in more than three decades. This sentiment has grown as concerns over rising oil prices due to the Middle East crisis have intensified, and there is no immediate indication that the situation will improve soon.

The current inflationary pressure is further exacerbated by the weak yen, which is increasing the cost of imported goods.