Tokyo Core Inflation Slows to Near 2-Year Low

Core consumer prices in Tokyo’s central wards rose 1.7% year-on-year in March 2026, easing slightly from a 1.8% increase in February and falling short of market expectations for a 1.8% gain. This marked the smallest rise since April 2024, driven in part by a moderation in processed food inflation (4.9% vs 5.5% in February). The latest figure remained below the Bank of Japan’s 2% target for the second consecutive month. However, analysts view the slowdown as temporary, noting that rising oil prices linked to the Middle East conflict and higher import costs due to the weak yen are likely to intensify inflationary pressures in the coming months.

Core consumer prices in Tokyo’s central wards increased 1.8% year-on-year in February 2026, easing from a 2% rise in January and marking the softest pace since October 2024. Inflation in Japan’s capital slowed for a third straight month, though it slightly exceeded market expectations of 1.7%. Even so, the February reading fell below the Bank of Japan’s 2% target, suggesting limited urgency for the central bank to tighten policy in the near term. The Japanese government nominated two reflation-leaning academics to the BOJ’s policy board, reinforcing expectations that policymakers will move cautiously on further rate hikes. However, hawkish board member Hajime Takata reiterated the need for additional rate increases and for forward guidance to reflect that the price stability target is close to being achieved. Governor Kazuo Ueda also reportedly indicated that the central bank will carefully assess incoming economic data at its March and April meetings before making any rate decisions.

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.