Core inflation in July rises 2.4% year-on-year in Japan... Largest increase in 7 years and 7 months

Raw Material Price Surge and Yen Depreciation... Over 2% for 4 Consecutive Months

[Asia Economy Reporter Lee Ji-eun] Japan's core Consumer Price Index (CPI) has exceeded the central bank's target of 2% for four consecutive months. The surge in raw material prices and the depreciation of the yen are analyzed to have driven up energy and food prices.

On the 19th, Japan's Ministry of Internal Affairs and Communications announced that the core CPI excluding fresh food for July recorded 102.2, rising 2.4% compared to the same month last year. This figure matches the market expectation of a 2.4% increase and marks the largest rise in 7 years and 7 months since December 2014 (2.5%), when the consumption tax hike had a significant impact.

Japan's inflation rate has exceeded the 2% inflation target for four consecutive months since April (2.1%). The comprehensive index including fresh food rose 2.6% year-on-year and 0.4% month-on-month.

The rise in prices was mainly driven by increases in energy costs such as electricity bills. Energy costs in July rose 16.2% compared to the same month last year. The rise in energy prices pushed the comprehensive index up by 1.22 points. Electricity charges increased by 19.6% year-on-year, and city gas fees rose by 24.3%. Gasoline prices, influenced by the decline in crude oil prices, rose only 8.3%, slowing down from 12.2% in June.

Food prices increased by 4.4%. Fresh food prices rose 8.3% year-on-year, while the inflation rate for food excluding fresh food recorded 3.7%. The inflation rate for food excluding fresh food marked the largest increase since March 2015 (3.8%).

Durable household goods, which rose 7.5% in June due to supply chain disruptions caused by China's lockdown measures, increased by 4.9% in July.

The inflation rates for July were 8.5% in the United States, 8.9% in the Eurozone, and 10.1% in the United Kingdom, respectively.