Tokyo Core Inflation Slows More Than Expected

Core consumer prices in Tokyo’s central wards rose 2% year-on-year in January 2026, down from a 2.3% increase in December and below market expectations of 2.2%. The reading marked the lowest level since October 2024 and aligned with the Bank of Japan’s 2% target, reinforcing expectations that the central bank will remain cautious on further rate hikes. The BOJ has repeatedly signaled that it is ready to raise borrowing costs if economic and price trends meet forecasts. The central bank raised its policy rate to a 30-year high of 0.75% in December, before keeping it unchanged in January.

Core consumer prices in Tokyo’s Ku-area rose 2.3% year-on-year in December 2025, easing from 2.8% in the previous month and undershooting market forecasts of 2.5%. The latest reading marked the lowest figure since February but remained above the Bank of Japan’s 2% target, underscoring persistent price pressures in the capital. While Tokyo's headline inflation softened to a more than one-year low of 2% in December, core forces remain firm, reinforcing expectations of a cautious policy path. Governor Kazuo Ueda said this week that underlying price growth is gradually accelerating toward the BoJ’s goal, signaling readiness to tighten further. His remarks followed last week’s rate hike to 0.75%, a 30-year peak, marking another step in unwinding Japan’s decades-long era of ultra-loose policy and near-zero borrowing costs.

Core consumer prices in Tokyo’s Ku-area rose 2.8% year-on-year in November 2025, unchanged from October and slightly above market expectations for a 2.7% increase. The reading stayed above the Bank of Japan’s 2% target and reinforced expectations of a gradual shift toward tighter policy. Speculation grew that the central bank could raise interest rates in December, supported by concerns over persistent inflation, a weaker yen and diminishing political pressure to keep rates low. Still, the likelihood of a move next month remains uncertain, with BOJ Governor Kazuo Ueda noting that the economy continues to recover moderately while warning that volatility in global trade policy could weigh on growth and corporate earnings. Tokyo’s inflation data are closely watched as a leading indicator of nationwide price trends.