Japan Core Inflation Quickens as Expected

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.4% year-on-year in April 2026, easing from 1.8% in the previous month and coming in softer than market forecasts of 1.7%. The latest reading marked the lowest level since March 2022 and remained below the Bank of Japan’s 2% target for a third straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Iran war. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which is closely watched by the Bank of Japan as a better gauge of demand-driven price movements, rose 1.9% in April, marking the softest increase since July 2024. The BoJ will meet on June 16, after keeping its short-term policy rate at 0.75% last month amid higher oil prices and yen weakness. The policymakers remained cautious about the uncertain situation in the Middle East, although several members still saw scope for near-term interest rate hikes.

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.