Japan Core Inflation Slows More Than Expected

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.8% year-on-year in March 2026, accelerating from 1.6% in the previous month and marking the first pickup in four months, driven by higher energy costs, in line with market forecasts. While the pace accelerated from the softest reading since March 2022 during February, inflation remained below the Bank of Japan’s 2% target for a second straight month, as government fuel subsidies offset pressures from rising oil linked to the Iran war. The BoJ will meet on April 28 after maintaining its policy rate at 0.75% last month, while signaling a bias toward further tightening to counter inflation risks. Its March Summary of Opinions noted that additional rate hikes remain appropriate as economic activity and prices improve, with monetary accommodation to be reduced gradually if the outlook holds.

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.6% year-on-year in February 2026, slowing for a third straight month and coming in below forecasts of 1.7%. That was also the smallest gain since March 2022. The government has taken steps to ease living costs and stabilize food prices, though higher energy prices stemming from the Iran war risk pushing inflation higher in March. The latest reading came in well below the Bank of Japan’s 2% target, offering little impetus to adjust monetary policy settings. Last week, the central bank kept its policy rate steady at 0.75% as expected, but signaled a bias toward further tightening to counter inflationary pressures from rising oil prices. BOJ Governor Kazuo Ueda added that a rate increase remains possible if the economic slowdown linked to the Iran conflict proves temporary.

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 2% year-on-year in January 2026, cooling from 2.4% in December and marking the weakest pace of growth in two years. The reading was in line with market expectations and aligned with the inflation target of the Bank of Japan, suggesting no immediate need to adjust monetary policy settings. The BOJ has indicated that price growth is likely to moderate further, partly due to additional government measures such as utility subsidies, as well as base effects from price surges a year earlier. Prime Minister Sanae Takaichi rolled out fiscal initiatives aimed at alleviating cost-of-living pressures, including proposals to suspend the 8% tax on food and reduce gasoline taxes. Nonetheless, authorities emphasized that they remain focused on underlying inflation trends rather than temporary or one-off factors.