Japan's core inflation accelerates, strengthening case for rate rise

Japan's core consumer price index, which excludes volatile food and energy costs, accelerated in July, marking another step toward the kind of sustained price growth that would support a monetary policy shift. The latest reading adds to mounting evidence that inflation pressures are building across the world's third-largest economy.

The uptick in core inflation comes as the Bank of Japan has already signalled openness to further rate adjustments following its initial hike earlier this year. Policymakers have indicated they will continue monitoring price developments to ensure inflation moves toward their 2 per cent target sustainably.

The July inflation data will feature prominently in the Bank of Japan's assessment at its September 17-18 policy meeting. Central bank officials are expected to review the full range of economic data, labour market conditions, and wage growth trends before deciding on their next move.

A rate increase would represent another step in the Bank of Japan's gradual normalisation of monetary policy after years of ultra-loose conditions. However, officials have signalled they will proceed cautiously to avoid disrupting economic growth or financial stability.