The Japanese yen is among the weaker currencies today despite the release of slightly higher core inflation. The USDJPY rises 0.20%.
In July, core inflation in Japan remained well above the Bank of Japan’s (BOJ) target. Consumer prices excluding fresh food rose 3.1% y/y (vs forecast 3.0%, previous 3.3%), while the broader measure excluding both food and energy held at 3.4% y/y. Energy prices fell 0.3% y/y (the first drop since March 2024), but food inflation remained elevated — processed food +8.3%, and rice +90.7% y/y (slightly less than in June). Persistent price pressures, especially on essentials, are weighing on households and fueling speculation that the BOJ may raise rates as early as October.
Some economists even point to the risk of higher inflation in the coming months. According to surveys, 63% of economists expect the BOJ to raise the policy rate from 0.50% to at least 0.75% by the end of 2025, marking a clear rise in expectations compared to previous months.
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