Japan Core CPI Rises 1.8% in July for Second Straight Monthly Acceleration, Markets Price 80% Odds of September BOJ Hike

Japan's core consumer price index climbed 1.8% year-on-year in July, accelerating for a second consecutive month and reinforcing expectations that the Bank of Japan will raise its policy rate from 1% to 1.25% at its September 17-18 meeting. The pickup was driven by firms passing on higher import costs stemming from a weak yen and elevated oil prices tied to the U.S.-Israeli conflict with Iran. While core inflation remains just below the BOJ's 2% target, underlying price pressures are holding near that level, and yen weakness continues to add to the broader inflation picture.

Markets moved to price roughly 80% odds of a September rate hike following the data release. The BOJ will scrutinize the July figures alongside other indicators as it weighs its next policy step.