Data released on Friday shows that core inflation in Japan's capital, Tokyo, accelerated its rise in June, indicating that price pressures stemming from the Middle East conflict are broadening.

According to the data, the core Consumer Price Index (CPI) for Tokyo in June, which excludes volatile fresh food prices, increased by 1.6% year-on-year. This figure is higher than the 1.3% rise seen in May and aligns with market expectations.

The so-called "core-core" CPI, which strips out both fresh food and fuel prices—an index closely monitored by the Bank of Japan as a better reflection of underlying inflation trends—rose by 1.9% compared to the same period last year. This is an increase from the 1.6% recorded in May.

These figures are set to be a key focus for the Bank of Japan at its upcoming policy meeting next month. At that meeting, the central bank's board will conduct its quarterly assessment of economic growth and price forecasts.

The conflict in the Middle East has complicated the Bank of Japan's decisions regarding the timing and scale of interest rate hikes. Rising energy costs are pushing inflation higher while simultaneously squeezing the Japanese economy, which is heavily reliant on oil imports.

Earlier this month, the Bank of Japan raised interest rates to their highest level in 31 years, a landmark move in its policy normalization process. This action signaled its readiness to further tighten monetary policy to address price pressures arising from the energy shock triggered by the conflict involving Iran.