Japan's core consumer prices surged 2.8 percent to a nearly eight-year high in August, in the latest sign of cost-push inflation accelerated by a weak yen to the detriment of consumers, government data showed Tuesday, heaping pressure on the dovish Bank of Japan.

The nationwide core consumer price index, which excludes volatile fresh food items, marked the fastest pace of increase in over three decades, without the effects of past consumption tax hikes.

The key gauge of inflation stayed above the BOJ's 2 percent target for the fifth month, accelerating from 2.4 percent in July, the Ministry of Internal Affairs and Communications said.

The headline figure marked the 12th straight month of year-on-year growth amid persisting inflationary pressures from higher energy costs blamed on Russia's war on Ukraine and the rapidly weakening yen. Economists expect it to top 3 percent this year, posing a challenge for the BOJ.

"What is striking is the impact of the weaker yen is getting bigger and bigger, while we have seen food prices also rising," said Yoshiki Shinke, senior executive economist at the Dai-ichi Life Research Institute.

The 2.8 percent gain in the core CPI was the steepest since 2.9 percent in October 2014, following a consumption tax hike from 5 to 8 percent earlier that year. Stripping away the tax hike boost, it rose 2.8 percent in September 1991.

Consumer inflation stood at 3.0 percent in August, when prices of fresh food items were included.

The BOJ has taken the view that the recent bout of inflation should only be temporary because it is mainly due to higher energy and raw material costs, going against the global trend of monetary tightening.

The yen has been falling sharply against the U.S. dollar, reflecting the divergent policy paths of the BOJ and the U.S. Federal Reserve. Both central banks are scheduled to hold policy-setting meetings this week.

The weaker yen has inflated the costs of imported crude oil and other energy sources, raw materials and food items, threatening to dent consumer sentiment despite government efforts to ease the pain.

A growing number of Japanese companies appear to have been passing on higher costs to consumers by raising retail prices, a positive development for the BOJ as it has been struggling for years to accelerate consumer inflation toward its elusive 2 percent target.

Energy prices jumped 16.9 percent from a year earlier, with those for electricity gaining 21.5 percent as they track crude oil and natural gas prices with a lag. Kerosene prices increased 18.0 percent and gasoline gained 6.9 percent, both slowing from a month earlier. They would have risen higher without government subsidies to oil wholesalers to lower retail prices.

Food prices, excluding perishables, gained 4.1 percent, the largest increase in nearly eight years, with more price hikes in the offing in the coming months.

Prices for durable goods, such as refrigerators and air conditioners, were up 6.3 percent, reflecting higher raw material prices and transport costs.

Inflation is picking up pace at a much slower speed in Japan than in the United States and Europe. But Japanese consumers are sensitive to price hikes at a time when wages are not rising much, clouding the outlook for the Japanese economy as its recovery from the COVID-19 pandemic fallout has been relatively slow.

"Cost-push inflation will not last forever, but rising prices are still negative for consumers," Shinke said.

He expects the core CPI to rise by 3 percent from a year earlier in September or October, adding that uncertainty remains over any impact from the government's envisaged discount program to spur tourism nationwide.

So-called core-core CPI, which excludes both energy and fresh food items, increased 1.6 percent, up for the fifth straight month.

Part of the steep gain in the inflation figure came as the year-on-year effect of sharply lower mobile phone fees continued to dissipate, with the relevant figure down 14.4 percent from a year earlier. Major mobile carriers began offering cheaper plans in 2021 amid mounting government pressure.


Related coverage:

FOCUS: Higher restaurant prices add to pressure on Japanese consumers

FOCUS: Hopes grow for win-win effect of inbound tourism in Japan, weak yen

Japan logs record 2.82 tril. yen trade deficit in August as imports surge