According to Futu News APP, Tokyo's inflation accelerated in June against the background of rising energy prices, and May's industrial output growth exceeded expectations, which may make the Bank of Japan consider a rate hike as early as July.

The core consumer price index (CPI) for Tokyo, which excludes fresh food, rose 2.1% year-on-year, up from 1.9% in May and above the market's widely expected 2%, according to data released Friday by Japan's Ministry of Internal Affairs. Tokyo's data is a leading indicator of the trend across Japan.

In another set of data, Japan's factory output in May grew 2.8% from April, exceeding the widespread expectation of 2%, as auto manufacturers, including Daihatsu, fully resumed production after a safety certification scandal caused some factories to shut down.

This inflation data was affected by policy measures in both directions. The Japanese government's gradual cancellation of utility subsidies and introduction of a renewable energy tax provided support for inflation, while Tokyo's education support program also played a role. The year-on-year core-core CPI, which excludes energy and fresh food, accelerated to 1.8%, reversing direction after nine consecutive months of deceleration.

Specifically, natural gas prices rebounded from a 3.9% decline last month to a 3.8% increase, contributing the most to overall price growth.

Despite the government's gradual cancellation of utility subsidies, electricity prices rose 10.8% year-on-year, lower than in May. Subsidies will be completely terminated by the end of this month.

Starting in May, the Japanese government also raised the renewable energy surcharge by about 2.5 times to 3.49 yen/kwh.

However, energy prices will continue to bring uncertainty to price trends, and Prime Minister Fumio Kishida recently announced a resumption of utility subsidies from August to October, apparently to revitalize his cabinet's declining support rate.

Overall, with key indicators returning to the Bank of Japan's target of 2% and new signs of health in manufacturing, Friday's data may continue to push the Bank of Japan towards normalizing monetary policy.

Taro Kimura, an economist at Bloomberg Economics, said: "Tokyo's hot June CPI report is not the last data released before the Bank of Japan's July meeting, but it provides compelling evidence that the Bank of Japan can continue to raise rates, which is our basic expectation."

At this month's policy meeting, the Bank of Japan kept interest rates unchanged while expressing an intention to reduce bond purchases. Some market participants have questioned whether the central bank can announce two major policy measures at the same meeting. Governor Haruhiko Kuroda has kept his options open, saying last week in parliament that it could raise policy rates next month if data supports it.

According to a survey earlier this week, a third of Bank of Japan watchers expect a rate hike in July.