Japan Aug core inflation hits eight-year high of 2.8% amid yen weakness

SINGAPORE (ICIS)–Japan’s core inflation rose by 2.8% year on year to nearly an eight-year high in August amid a weakening yen and soaring energy costs, official data showed on Tuesday.

The nationwide core consumer price index (CPI), which excludes fresh food but includes fuel costs, accelerated from the 2.4% year on year growth in July and marked the largest increase since a 2.9% rise in October 2014, data from e-Stat, the official website for Japanese government statistics, showed.

Energy prices rose by 16.9% year on year in August, accelerating from the 16.2% increase in July, while electricity prices were up by 21.5% last month from the 19.6% rise in July.

The yen is currently trading near its weakest levels since 1998 after plunging by around 25% against the US dollar since March.

At 03:15 GMT on Tuesday, the yen was trading at 143.16 to the dollar.

The weaker yen has significantly inflated the costs of imported oil and raw materials as well as food items.

The currency on 1 September fell to 139.69 per dollar, a level not seen since 1998.

At its meeting ending on 21 July, the Bank of Japan (BOJ) kept its policy rate unchanged at minus 0.10% and kept its 10-year government bond yield target at 0.00%, as widely expected by the market.

“Even though the BOJ expects price pressures to be higher and more persistent than earlier projected, it still sees inflation falling to below target in the next fiscal year, reducing pressure to hike,” Spain-based economic research firm FocusEconomics said in a note.

The next BOJ monetary policy meeting is set to take place on 21-22 September.