By Leika Kihara
TOKYO, July 31 (Reuters) – Annual core inflation in Japan’s capital accelerated in July, data showed on Friday, a sign of broadening price pressures from the Middle East conflict that keeps the central bank on track to consider further raise interest rates.
Separate data showed factory output rose in June, and manufacturers projected further increases this month and next, suggesting the economy was weathering the hit from high oil costs and supply disruptions from the Middle East war.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 1.9% in July, faster than a median market forecast for a 1.7% gain.
It followed a 1.6% rise in June and stayed below the BOJ’s 2% target for a sixth straight month.
The increase in the index, seen as a leading indicator of nationwide trends, was driven by continued gains in prices of food and daily necessities, the data showed.
Service-sector inflation was steady at 1.1% in July, a sign firms were slow in passing on rising labour costs compared with that for raw material.
An index stripping away the effect of fresh food and fuel, which is closely watched by the BOJ as a better gauge of trend inflation, rose 2.0% in July after a 1.9% gain in June.
The BOJ is widely expected to keep interest rates steady on Friday after raising them to a 31-year high of 1% in June, as the economy faced mounting inflationary pressure from the Middle East war and a weak yen.
(Reporting by Leika Kihara; Editing by Sam Holmes)
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