Japan’s headline inflation reached its highest level this year in July, coming in at 1.9%. Core inflation, which strips out fresh food prices but includes energy, was in line with expectations at 1.8%. Energy prices rose for the first time since November 2025 due to high oil prices from the Iran war, driving wholesale inflation to 7.2% in July, with electricity charges being the largest contributor. The Bank of Japan expects core inflation to accelerate above 2% in the second half of fiscal year 2026, before declining back toward 2% as crude oil prices are expected to fall.
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