Japan Core Inflation Rises Above BoJ Target

Japan’s core consumer price index, which excludes fresh food but includes energy, increased 2.1% year-on-year in September 2026, following a 1.7% rise in August. It was the highest reading since December 2025, matching market forecasts. The latest reading pushed inflation above the Bank of Japan’s 2% target for the first time in nine months, though government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding fresh food and fuel, which the Bank of Japan closely watches as a better gauge of demand-driven price movements, rose 2.4% year-on-year in September, marking the first increase since October 2025 and the fastest pace in six months. The BoJ raised interest rates by 25 bps to 1.25% at its September meeting, bringing borrowing costs to their highest level since April 1995.

Japan’s core consumer price index, which excludes fresh food but includes energy, increased 1.7% yoy in August 2026, after a 1.8% rise in July. The latest reading slowed from the highest rate in six months, touched a month earlier, and was below the market forecast of 1.8%. Still, the latest reading remained below the Bank of Japan’s 2% target for an eighth straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which the Bank of Japan closely watches as a better gauge of demand-driven price movements, stood at 1.9% year-on-year in August, remaining at its fastest increase in three months. The BoJ left interest rates at 1.0% at its July meeting, keeping them at their highest level since September 1995, after a 25-bps hike in June. The release came hours before the BoJ’s meeting today, with the market expecting rates to rise to 1.25%.

Japan’s core consumer price index, which excludes fresh food but includes energy, increased 1.8% year-on-year in July 2026, following a 1.6% rise in June. It was the highest core inflation rate since January, in line with market forecasts. Still, the latest reading remained below the Bank of Japan’s 2% target for a seventh straight month, as government fuel subsidies helped offset price pressures from higher oil costs linked to the Middle East conflict. Meanwhile, the index excluding the effects of volatile fresh food and fuel, which the Bank of Japan closely watches as a better gauge of demand-driven price movements, climbed 1.9% year-on-year in July, marking the fastest increase in three months after posting the softest increase since August 2022 at 1.7% in June. The BoJ left interest rates at 1.0% at its July meeting, remaining at their highest level since September 1995, following a 25-bps hike in June to prevent higher oil prices from fueling inflation.