Japan Macro Updates

Key takeaway: Data released by Japan’s Ministry of Internal Affairs and Communications showed that headline consumer prices in the Tokyo metropolitan area increased by 1.7% in June compared with a year earlier, up from 1.4% in May. Meanwhile, Core CPI, which excludes fresh food, increased by 1.6% year-over-year, accelerating from 1.3% in the previous month. The more closely watched measure of inflation, which excludes both fresh food and energy, increased by 1.9% compared with a year earlier, up from 1.6% in May, indicating that underlying inflationary pressures strengthened during the month. Taken together, the latest data suggests that inflation in Tokyo picked up in June, driven in part by higher energy prices, while underlying inflation also continued to trend higher.

• Tokyo Core CPI increased to 1.6% y-o-y in Jun (expected +1.6%, May: 1.3%)

29th May 2026

Key takeaway: The Tokyo CPI for May 2026, released on May 29, missed on every measure and handed BOJ doves their clearest data point yet against a near-term rate hike. Tokyo core CPI — excluding fresh food — rose just 1.3% year-on-year in May, below the 1.5% consensus forecast and down from April’s 1.5%, marking a sixth consecutive month of slowdown and the weakest reading in four years. The continued deceleration reflects government fuel and education subsidies suppressing measured price growth even as rising import costs — driven by the weaker yen and Middle East-related commodity pressures — push in the opposite direction, creating a split between what households are paying at the pump and in supermarkets versus what the official index is capturing. As a leading indicator of national CPI released roughly a month ahead of the nationwide print, the Tokyo read points to the April national CPI softness — itself a four-year low at 1.4% core — extending into May, and significantly complicates the BOJ’s case for a June rate hike at a time when the central bank is already navigating slowing growth and a yen that has been testing 160 against the dollar. The BOJ now faces an uncomfortable bind: underlying inflation pressures from a weak yen and elevated energy costs are real, but the headline and core measures that shape the policy narrative are running well below the 2% target and moving in the wrong direction.

• Tokyo Core CPI declined to 1.3% y-o-y in May (expected +1.5%, Apr: 1.5%)

1st May 2026
Key takeaway: Tokyo’s CPI for April 2026, released May 1, surprised sharply to the downside across all measures — handing the Bank of Japan a data-driven reason for caution just days after signalling a possible June rate hike. Core CPI excluding fresh food rose just 1.5% year-on-year — the weakest reading since March 2022, its fifth consecutive month of deceleration and the longest such streak since 2009 — missing the 1.8% forecast and slowing from 1.7% in March. The more closely watched core-core measure, stripping out both fresh food and energy, decelerated sharply to 1.9% from 2.3%, against an expectation of an unchanged 2.3% — hitting a 14-month low and marking a significant miss. The key driver of the surprise was government intervention: fuel subsidies on gas and electricity remained in place and Tokyo also released oil from its strategic reserves to stabilise local supply, artificially suppressing the headline and core readings despite rising raw material costs from the Iran war. Falling nursery fees following expanded childcare subsidies also contributed to the cooling. Analysts broadly expect inflation to re-accelerate in coming months as oil price pressures and yen weakness feed through, but for now the April print gives the BOJ genuine cover to delay its anticipated June hike — a clearly yen-negative, JGB-positive outcome.

• Tokyo Core CPI declined to 1.5% y-o-y in Apr (expected +1.8%, Mar: 1.7%)

31st Mar 2026

Key takeaway: Tokyo’s CPI data for March 2026, released on March 31, showed inflation cooling further — but with a complex backdrop that keeps the Bank of Japan’s policy path finely balanced. Consumer prices excluding fresh food rose 1.7% year-on-year in March, the smallest increase since April 2024, coming in slightly below the consensus expectation of 1.8%, with the slower reading partly driven by a deceleration in processed food cost gains to 4.9% from 5.5% the prior month. Headline Tokyo CPI also rose at its slowest pace since March 2022, while the core-core measure — excluding fresh food and energy — posted its slowest gain since March 2025. The softness in core inflation largely reflects the continuing impact of government energy subsidies suppressing utility costs, rather than a genuine easing of underlying price pressures. Despite the cooler print, prospects for higher energy prices stemming from the Iran war are expected to keep the BOJ on track for further rate increases. The BOJ, which held its policy rate steady at 0.75% at its March meeting, signalled it will continue raising rates if growth and inflation unfold as projected, while flagging that CPI is expected to dip below 2% temporarily before facing renewed upward pressure from rising crude oil prices. Tokyo CPI serves as a closely watched leading indicator for Japan’s national inflation trends, making the March reading an important data point as the BOJ weighs the timing of its next move.

• Tokyo Core CPI declined to 1.7% y-o-y in Mar (expected +1.8%, Feb: 1.8%)

27th Feb 2026

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 1.6% y-o-y, slightly higher than the 1.6% in January. Headline Tokyo area CPI has declined substantially in the second half of 2025 after having reached a high of around 3.5% in mid 2025. The sharp decrease was driven in large part due to base effects from falling food and utilities prices. Due to the same reasons, Core CPI which excludes fresh food but includes energy has also declined substantially from the highs of around 3.5% reached in mid 2025. The latest release shows the Core CPI measure at 1.8%, once again lower than the 2.0% recorded in the month of January. The core-core measure, which excludes fresh food and energy increased slightly from to 2.4% to 2.5%. The impact of fuel subsidies given by the government makes the headline and core measures distorted. This core-core measure is hence the key focus for the BoJ and indicative of underling true price pressures in Japan.  The annual spring wage negotiations are also once again in focus as the BoJ wants to see continuing signs of a benign wage price spiral. It is also worth noting that GDP in Japan had contracted in 3Q, for the first time in 6 quarters, mostly on the back of weaker exports as domestic consumption remained strong. Nonetheless, with inflation remaining above the BoJ’s target for 3 years in a row, it is more likely than not that the BoJ will continue to tighten monetary policy, albeit gradually

• Tokyo Core CPI declined to 1.8% y-o-y in Feb (expected +1.7%, Jan: 2.0%)

29th Jan 2026

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 1.5% y-o-y, sharply down from the 2.0% in the previous month of December. Headline Tokyo area CPI has declined substantially in the second half of 2025 after having reached a high of around 3.5% in mid 2025. The sharp decrease was driven in large part due to base effects from falling food and utilities prices. Due to the same reasons, Core CPI which excludes fresh food but includes energy has also declined substantially from the highs of around 3.5% reached in mid 2025. The latest release shows the Core CPI measure at 2.0%, lower than the 2.3% recorded in the month of December and also lower than consensus expectations. The core-core measure, which excludes fresh food and energy, also declined, but slightly, from 2.6% to 2.4%. This core-core measure is the key focus for the BoJ and indicative of underling true price pressures in Japan. The annual spring wage negotiations are also once again in focus as the BoJ wants to see continuing signs of a benign wage price spiral. It is also worth noting that GDP in Japan had contracted in 3Q, for the first time in 6 quarters, mostly on the back of weaker exports as domestic consumption remained strong. Nonetheless, with inflation remaining above the BoJ’s target for 3 years in a row, it is more likely than not that the BoJ will continue to tighten monetary policy, albeit gradually.  

• Tokyo Core CPI declined to 2.0% y-o-y in Jan (expected +2.2%, Dec: 2.3%)

25th Dec 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 2.0% y-o-y, sharply down from the 2.7% in the previous month of November. Headline Tokyo area CPI has declined substantially in the second half of 2025 after having reached a high of around 3.5% in mid 2025. The sharp decrease was driven in large part due to base effects from falling food and utilities prices. Due to the same reasons, Core CPI which excludes fresh food but includes energy also declined from 2.8% to 2.3%. The core-core measure, which excludes fresh food and energy, also declined, but slightly, from 2.8% to 2.6%. This core-core measure is the key focus for the BoJ and indicative of underling true price pressures in Japan. The annual spring wage negotiations are also once again in focus as the BoJ wants to see continuing signs of a benign wage price spiral. It is also worth noting that GDP in Japan had contracted in 3Q, for the first time in 6 quarters, mostly on the back of weaker exports as domestic consumption remained strong. Nonetheless, with inflation remaining above the BoJs target for 3 years in a row, it is more likely than not that the BoJ will continue to tighten monetary policy, albeit gradually.  

• Tokyo Core CPI declined to 2.3% y-o-y in Dec (expected +2.5%, Nov : 2.8%)

28th Nov 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 2.7% y-o-y, slightly down from the 2.8% in the previous month of October. Headline Tokyo area CPI had declined for 3 consecutive months from June through August after having reached 3.4% in May 2025. Since then, October was the first month to record an increase, post which headline CPI has declined a bit again in November. Core CPI which excludes fresh food but includes energy remained steady at 2.8%, same as the previous month of October, but was slightly higher than consensus expectations of 2.7%. The core-core measure, which excludes fresh food and energy, also printed at 2.8%, the same as the previous month. Services prices rose 1.5%. Rice inflation continued its downward descent, rising 38% from a year earlier. Even though domestic consumption in Japan has stayed quite strong, exports were weaker in Q3 on account of the tariff issues. GDP in Japan had hence contracted in 3Q, for the first time in 6 quarters. Nonetheless, with inflation remaining above the BoJs target for 3 years in a row, a rate hike from the BoJ is on the cards.  

• Tokyo Core CPI remained the same at 2.8% y-o-y in Nov (expected +2.7%, Oct : 2.8%)

31st Oct 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 2.8% y-o-y, up from the 2.5% in the previous month of September. Headline Tokyo area CPI had declined for 3 consecutive months from June through August after having reached 3.4% in May 2025. Since then, October is the first month to record an increase. Core CPI which excludes fresh food but includes energy, also increased to 2.8% in October from 2.5% in September. The core-core measure, which excludes fresh food and energy, also printed at 2.8% yo-y, versus 2.5% in September. The latest data comes one day after the BoJ held rates steady at the latest its latest meeting in October. However, there were also 2 dissenters at the latest meeting arguing for a rate hike given the continuing inflationary pressures. Domestic consumption in Japan has stayed quite strong. Real estate prices in the large cities of Tokyo, Kyoto and Osaka have especially risen in recent months as investors are piling in. Moreover, exports, which are critical to the Japanese economy, seem to have stabilized in the last couple of months after having fallen post April / May. With tariff related uncertainty diminishing, a rate hike from the BoJ is on the cards.   

• Tokyo Core CPI increased to 2.8% y-o-y in Oct (expected +2.6%, Sep : 2.5%)

26th Sep 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI at 2.5% y-o-y, at the same level as the previous month of August. Headline Tokyo area CPI had declined for 3 consecutive months from June through August after having reached 3.4% in May 2025. Core CPI which excludes fresh food but includes energy, also held steady at 2.5% in September, same as in August. Inflation in Japan had risen substantially in the past year. The astronomical increase in rice prices was both noteworthy as well as politically consequential. The recent few months data hence provides some respite from the rising inflation data of the past few months. The core-core measure, which excludes fresh food and energy,also printed at 2.5% yo-y, versus consensus expectations of 2.9%. The measure was also substantially lower than the 3.0% in the previous month of August While BoJ held steady at the latest its latest meeting in September, dissents are rising at the committee with growing calls for further rate hikes before the year is over. Domestic consumption in Japan has stayed quite strong. Real estate prices in the large cities of Tokyo, Kyoto and Osaka have especially risen in recent months as investors are piling in. Yet, exports have fallen since the sharp rise seen earlier in the year as firms frontloaded goods purchases to circumvent tariffs. Once again global uncertainty is taking centerstage and the growth outlook remains key for the BoJ to determine monetary policy going forward.   

• Tokyo Core CPI remained at 2.5% y-o-y in Sep (expected +2.8%, Aug : 2.8%)

29th Aug 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI, at 2.6% y-o-y, decelerated once again in August compared to the previous month of July. This is the 3rd consecutive decelerating print after headline CPI reached 3.4% in May 2025. Core CPI which excludes fresh food but includes energy, rose 2.5% in August, down from 2.9% in July. Inflation in Japan had risen substantially in the past year. The astronomical increase in rice prices was both noteworthy as well as politically consequential. The recent 3 months data hence provides some respite from the rising inflation data of the past few months. Exports have fallen since the sharp rise seen earlier in the year as firms frontloaded goods purchases to circumvent tariffs. Once again global uncertainty is taking centerstage and the growth outlook becomes key for the BoJ to determine monetary policy going forward. Underlying inflation, or the core-core measure, which strips out fresh food and energy, moved down slightly from 3.1% in July to 3.0% in August. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has been increasing over the past year.  

• Tokyo Core CPI increased 2.5% y-o-y in Aug (expected +2.5%, Jul : 2.9%)

25th Jul 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decelerated once again in July compared to the previous month of June. Core CPI which excludes fresh food but includes energy, rose 2.9% in July, down from 3.00% in June. The print was also lower than consensus expectations of 3.0%. Japanese firms typically raise prices at the start of the fiscal year in April and review them again in October. Accordingly, we had seen inflation in Japan spike substantially in the month of April and once again in May. Tokyo CPI is usually released a month earlier than the National index and hence is treated as a leading indicator for inflation in Japan. Hence, 2 continuous months of weaker inflation data will be noted with interest by market participants. However, the fact remains that both headline and core inflation have increased substantially in the past 6-8 months. The latest Tokyo data for June and July provides some respite from the rising inflation data of the past few months. Underlying inflation, or the core-core measure, which strips out fresh food and energy, remained unchanged at 3.1% in July. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has been increasing over the past year.  

• Tokyo Core CPI increased 2.9% y-o-y in Jul (expected +3.0%, Jun : 3.1%)

27th Jun 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decelerated in June compared to the previous month of May. Core CPI which excludes fresh food but includes energy, rose 3.1% in June, down from 3.6% in May. The print was also lower than consensus expectations of 3.3%. Japanese firms typically raise prices at the start of the fiscal year in April and review them again in October. Accordingly, we had seen inflation in Japan spike substantially in the month of April and once again in May. Tokyo CPI is usually released a month earlier than the National index and hence is treated as a leading indicator for inflation in Japan. Both headline and core inflation have increased substantially in the past 6-8 months. The national CPI data released a week back also reaffirmed rising inflationary pressures with core and core-core measures printing higher in May. The latest Tokyo data for June provides some respite from the rising inflation data of the past few months. Although it is also key to note that the reduction was attributable to the municipal governments waiver of some water charges. Underlying inflation, or the core-core measure, which strips out fresh food and energy, also decreased from 3.3% in May to 3.1% in June. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has been increasing over the past year.  

• Tokyo Core CPI decreased 0.2% m-o-m and increased 3.1% y-o-y in Jun (expected +3.3%)

30th May 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI accelerated once again in May compared to the previous month of April. Core CPI which excludes fresh food but includes energy, rose 3.6% in May, up from 3.4% in April. The print was also higher than consensus expectations of 3.5%. Japanese firms typically raise prices at the start of the fiscal year in April and review them again in October. Accordingly, we had seen inflation in Japan spike substantially in the previous month of April. Tokyo CPI is usually released a month earlier than the National index and hence is treated as a leading indicator for inflation in Japan. Both headline and core inflation have increased substantially in the past 6-8 months. The headline index remained flat at 3.4% in May. Underlying inflation, or the core-core measure, which strips out fresh food and energy, also increased from 3.1% in April to 3.3% in May. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has increasing over the past year. Services inflation has been on the rise as well, increasing for a 4th month in a row, up to 2.2% from 2.0% the month earlier. Finally, one of the most important factors to consider is the recent spring wage negotiations which have resulted in approx. 5-5.5% wage gains for labour unions. A next rate hike from BoJ seems on the horizon. Trump tariffs remain the elephant in the room. 

• Tokyo Core CPI increased 0.4% m-o-m and increased 3.6% y-o-y in May (expected +3.5%)

25th Apr 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI accelerated once again sharply in April compared to the previous month of March. Core CPI which excludes fresh food but includes energy, rose 3.4% in April, sharply up from 2.4% in March. The print was also higher than consensus expectations of 3.2%. Economists attribute the increase in inflation to broad based price hikes by Japanese companies. According to a survey, 195 major domestic food and beverage makers decided to raise prices for 4,225 items in April, the broadest hike in 18 months. Japanese firms typically raise prices at the start of the fiscal year in April and review them again in October. The headline index increased to 3.5% in April, increasing from the 2.9% recorded in March. Underlying inflation, or the core-core measure, which strips out fresh food and energy, also increased from 2.2% in March to 3.1% in April. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has been showing signs of breaking out. Services inflation has been on the rise as well, increasing for a 3rd month in a row up 0.3% in April. Finally, one of the most important factors to consider is the recent spring wage negotiations which have resulted in approx. 5-5.5% wage gains for labour unions. A next rate hike from BoJ seems on the horizon. Trump tariffs remain the elephant in the room.  

• Tokyo Core CPI increased 0.5% m-o-m and increased 3.4% y-o-y in Apr (expected +2.4%)

28th Mar 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI accelerated once again in March compared to the previous month of February. Core CPI which excludes fresh food but includes energy, rose 2.4% in March, up from 2.2% in February. The print was also higher than consensus expectations of 2.2%. The headline index increased to 2.9% in March, a slight increase from the 2.8% recorded in February. Underlying inflation, or the core-core measure, which strips out fresh food and energy, increased to 2.2% in March from 1.9% in February. The BoJ and Governor Ueda have been watching this core-core measure, which had mostly remained below 2% in 2024, but has been showing signs of breaking out. Service inflation is also picking up. Finally, one of the most important factors to consider is the recent sprint wage negotiations which have resulted in approx. 5-5.5% wage gains for labour unions. A next rate hike from BoJ seems on the horizon. Trump tariffs remain the elephant in the room.  

• Tokyo Core CPI increased 0.5% m-o-m and increased 2.4% y-o-y in Mar (expected +2.2%)

28th Feb 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI grew at a slower pace in February compared to the previous month of January. Core CPI which excludes fresh food but includes energy, rose 2.2% in February, down from 2.5% in January. The print was also lower than consensus expectations of 2.3%. The headline index increased 2.9% in February, a slowdown from the 3.4% recorded in January. The BoJ raised rates last month from 0.25% to 0.5%. The latest soft data on Tokyo CPI will cool down expectations of an immediate next rate hike. The BoJ did not give any clear guidance on subsequent rate hikes in its last meeting. Underlying inflation, or the core-core measure, which strips out fresh food and energy, grew 1.9% in February, unchanged from the pace in the previous month. In the last BoJ meeting, BoJ Governor Ueda highlighted that this core-core measure still remains below 2%, indicating that he is likely to remain patient on further rate hikes. The 2 most important upcoming factors will be the spring wage negotiations in March and April and the looming threat of Trump tariffs. 

• Tokyo Core CPI decreased 0.1% m-o-m and increased 2.2% y-o-y in Feb (expected +2.3%)

30th Jan 2025

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area headline CPI accelerated sharply once again from 3.0% in December t0 3.4% in January. The Core measure, which includes energy but strips out the volatile fresh food, accelerated from 2.4% in December to 2.5% in January. The BoJ raised rates this week from 0.25% to 0.5%. No further indications were given on the timing of the next rate hike. However, the latest Tokyo inflation data not only vindicates the latest rate hike but also supports the case for further upcoming rate hikes. Underlying inflation, or the core-core measure, which strips out fresh food and energy, grew 1.9% in January compared to 1.8% in December. Interestingly, BoJ Governor Ueda highlighted that this core-core measure still remains below 2%, indicating that he is likely to remain patient on further rate hikes. The 2 most important upcoming factors will be the spring wage negotiations in March and April and the looming threat of Trump tariffs. 

• Tokyo Core CPI increased 0.3% m-o-m and increased 2.5% y-o-y in Jan (expected +2.5%)

26th Dec 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area headline CPI accelerated sharply once again from 2.6% in November to 3.0% in December. The Core measure, which includes energy but strips out the volatile fresh food, accelerated from 2.2% in November to 2.4% in December. Though it was below consensus expectations of 2.5%. A part of this increase was on account of the phasing out of energy subsidies. However, even core core inflation, which strips out energy as well as fresh food, increased 1.8%. Though this was a deceleration from the 1.9% recorded the previous month in November. Services inflation, often viewed as more sticky compared to goods inflation, accelerated from 0.9% in November to 1.0% in December. Overall, the latest release increases the probability of a BoJ rate hike on the immediate horizon. The BoJ next meets on January 23rd and markets will be looking for clues to see if a rate hike will take place at that meeting. Though, it is also worth noting that inflation in Japan has not really yet taken off. Despite recent increases, core core inflation in Tokyo has printed below 2% for most of 2024.  

• Tokyo Core CPI increased 0.4% m-o-m and increased 2.4% y-o-y in Dec (expected +2.5%)

29th Nov 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area headline CPI accelerated from 1.8% in October to 2.6% in November. The Core measure, which includes energy but strips out the volatile fresh food, accelerated from 1.8% in October to 2.2% in November. It was also above consensus expectations of 2.0%. A part of this increase was on account of the phasing out of energy subsidies. However, even core core inflation, which strips out energy as well as fresh food, increase 1.9% – accelerating from 1.8% in October. Services inflation, often viewed as more sticky compared to goods inflation, accelerated from 0.8% to 0.9% in November. Overall, the latest release increases the probability of a BoJ rate hike on the immediate horizon i.e. December / January. However, it is also worth noting that inflation in Japan has not really yet taken off. Despite the increase in November, Core core inflation in Tokyo has printed below 2% for the past 8 months. Nonetheless, the latest Tokyo CPI release will be closely scrutinized by the BoJ and by markets and we already saw an appreciating yen breach the 150 mark on the back on this latest data release.  

• Tokyo Core CPI increased 0.4% m-o-m and increased 2.2% y-o-y in Nov (expected +2.0%)

25th Oct 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decreased from 2.1% in September to 1.8% in October. In general, inflation in Japan peaked in early 2023 and has since been on a downward trend. More importantly, the inflation rate in Japan has been above the 2% BoJ target for more than 2 years. The annual labour wage negotiations at the start of 2024, also called “Shunto” have been successful in negotiating some of the larges wage hikes in decades. That is expected to spur consumption and keep the inflation rate at or above the 2% level. However, even though headline inflation and inflation ex fresh food has been higher than 2% for most of 2 years, core core inflation (which excludes fresh food and energy) has not really taken off. Core core inflation in Tokyo has printed below 2% for the past 7 months. The latest print for October was also relatively weak at 1.1%. An equally key point to note is that the government in Japan reinstated energy related subsidies which contributed to the reduction in inflation in September. Nonetheless, the latest print continues to show that overall wage led inflation is not yet showing signs of a sustained increase in Japan. Core Tokyo CPI, which excludes fresh food, printed at 1.8%. This will continue to put obstacles in the path of policy normalisation for the BoJ. Tokyo area inflation data is usually released ahead of the national level data.

• Tokyo Core CPI increased 0.4% m-o-m and increased 1.8% y-o-y in October (expected +1.7%)

27th Sep 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decreased from 2.6% in August to 2.2% in September. In general, inflation in Japan peaked in early 2023 and has since been on a downward trend. More importantly, the inflation rate in Japan has been above the 2% BoJ target for more than 2 years. The annual labour wage negotiations at the start of 2024, also called “Shunto” have been successful in negotiating some of the larges wage hikes in decades. That is expected to spur consumption and keep the inflation rate at or above the 2% level. However, even though headline inflation and inflation ex fresh food has been higher than 2% for most of 2 years, core core inflation (which excludes fresh food and energy) has not really taken off. Core core inflation in Tokyo has printed below 2% for the past 6 months. The latest print for September is also relatively weak. An equally key point to note is that the government in Japan reinstated energy related subsidies which contributed to the reduction in inflation in September. The government measures are said to have shaved off 0.5% off overall inflation. Tokyo area inflation data is usually released ahead of the national level data.

• Tokyo Core CPI decreased 0.5% m-o-m and increased 2.0% y-o-y in September (expected +2.0%)

25th Jul 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decreased slightly from 2.3% to 2.2%. In general, inflation in Japan peaked in early 2023 and has since been on a downward trend. However, more importantly, the inflation rate in Japan has been above the 2% BoJ target for more than 2 years. The annual labour wage negotiations at the start of 2024, also called “Shunto” have been successful in negotiating some of the larges wage hikes in decades. That is expected to spur consumption and keep the inflation rate at or above the 2% level. However, inflation has been trending sideways for the past 4-5 months without clear indications whether the resurgence of healthy inflation in Japan is sustainable or not. Tokyo inflation leads the national print by a couple of weeks and hence is tracked closely. The Core CPI, however, has steadily increased in the last 4 months from 1.6% to 2.2%. The underlying softness in inflation data continues to create doubts regarding future rate hikes from the BoJ. Economic data in Japan has been mixed in general. 

• Tokyo Core CPI increased 0.4% m-o-m and increased 2.2% y-o-y in July (expected +2.2%)

30th May 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI a slight increase in May with a reading of 1.9% y-o-y compared to 1.6% the previous month. In general, inflation in Japan peaked in early 2023 and has since been on a downward trend. However, more importantly, the inflation rate in Japan has been above the 2% BoJ target for more than 2 years. The annual labour wage negotiations at the start of 2024, also called “Shunto” have been successful in negotiating some of the larges wage hikes in decades. That is expected to spur consumption and keep the inflation rate at or above the 2% level. However, inflation has been trending sideways for the past 4-5 months without clear indications whether the resurgence of healthy inflation in Japan is sustainable or not. Tokyo inflation leads the national print by a couple of weeks and hence is tracked closely. The latest print, even though it shows an increase, continues to hide some softness underneath. The rise in Core CPI was mostly attributable to the phasing out of some energy subsidies and an increase in renewable energy levy on electricity charges. The Core CPI ex energy slowed to 1.7% y-o-y compared to an estimate of 1.8%. The underlying softness in inflation data continues to create doubts regarding future rate hikes from the BoJ. Economic data in Japan has been mixed in general. 

• Tokyo Core CPI increased 0.3% m-o-m and increased 1.9% y-o-y (expected +1.9%)

26th Apr 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decelerated significantly in April with a reading of 1.6% y-o-y compared to 2.4% the previous month. Tokyo inflation had increased sharply in February after having fallen sharply in January and then fallen slightly in March. The large decrease in April though is significantly attributable to an education subsidy. The Tokyo metropolitan government made high school tuition free for all income groups and began providing subsidies to households with children attending private secondary schools. The sharp plunge for education costs is said to have shaved 0.5% from the overall CPI number. Hence, even though Tokyo inflation data is said to be leading indicator of national inflation, next month’s national inflation release is not expected to show the same quantum of drop. The BoJ still seems to be straddling a middle line with messaging that they will be data dependent. If inflation increases further and there are incremental signs of inflation being firmly entrenched, it will continue with additional rate hikes and vice versa. The BoJ already made its first move in increasing interest rates and normalising monetary policy. With wages on the rise, the likelihood of sticker inflation in Japan is progressively getting higher, putting more rate hikes on the horizon. Another key point to note is that energy subsidies put in place over the past few years will progressively roll off. That will also put some upward pressure on headline inflation. Headline CPI increased 1.8% compared to 2.6% in March. Finally, CPI ex food and energy – which is often called “Core-Core CPI” fell from 2.9% in March to 1.4% in April.

• Tokyo Core CPI decreased 0.1% m-o-m and increased 1.6% y-o-y (expected +2.2%)

29th Mar 2024

Key takeaway: The latest release from the Statistics Bureau of Japan showed Tokyo area CPI decelerated slightly in March with a reading of 2.4% y-o-y compared to 2.5% the previous month. Tokyo inflation had increased sharply in February after having fallen sharply in January. Even though it fell slightly in March, the key point to note is that it remains above the 2% target level of the BoJ. Equally important to note that this was in line with consensus expectations. There are 2 key points to understand. First, Tokyo CPI data is released ahead of the National CPI number. Second, it  is generally thought of to be adequately reflective of inflation in Japan. Hence it serves as bit of a leading indicator. Since the last Tokyo area inflation report, we have already seen the BoJ make its first move in increasing interest rates and normalising monetary policy. With wages on the rise, the likelihood of sticker inflation in Japan is progressively getting higher, putting more rate hikes on the horizon. Another key point to note is that energy subsidies put in place over the past few years will progressively roll off. That will also put some upward pressure on headline inflation. Headline CPI increased from 2.5% to 2.6%. Finally, CPI ex food and energy – which is often called “Core-Core CPI” fell to 2.9% in March from 3.1% in February.

• Tokyo Core CPI increased 0.2% m-o-m and increased 2.5 % y-o-y (expected +2.5%)

4th Mar 2024

Key takeaway: Tokyo inflation increased sharply in February after having fallen sharply in January. Core CPI, which excludes fresh food, increased from 1.8% in January to 2.5% in February. Although, equally important to note that this was in line with consensus expectations. There are 2 key points to understand. First, Tokyo CPI data is released ahead of the National CPI number. Second, it  is generally thought of to be adequately reflective of inflation in Japan. Hence it serves as bit of a leading indicator. There is strong anticipation that we will soon see a policy pivot from the Bank of Japan as they draw curtains on negative interest rates and Yield Curve Control. This higher inflation print bring that narrative into sharp focus. In recent weeks, we have seen more verbal indications from the Japanese Monetary Policy committee members on an upcoming shift in monetary policy, albeit to a limited extent and still a mostly accommodative stance. Headline CPI also increased from 1.8% to 2.5%. Finally, in contrast to the other 2 indicators, CPI ex food and energy – which is often called “Core-Core CPI” fell to 3.1% in February from an upwardly revised 3.3% in January.

• Tokyo Core CPI increased 0.2% m-o-m and increased 2.5 % y-o-y (expected +2.5%)

25th Jan 2024

Key takeaway: Tokyo inflation fell sharply in January starting 2024 with a bang. Core CPI, which excludes fresh food, declined from 2.1% in December to 1.6% in January. This was substantially lower than the 1.9% consensus expectation and most importantly below the BoJ target of 2% inflation. There are 2 key points to understand. First, Tokyo CPI data is released ahead of the National CPI number. Second, it  is generally thought of to be adequately reflective of inflation in Japan. Hence it serves as bit of a leading indicator. There is strong anticipation that we will soon see a policy pivot from the Bank of Japan as they draw curtains on negative interest rates and Yield Curve Control. However, sharply falling inflation raises some questions over how soon will that materialize. Headline CPI also moderated from 2.4% to 1.6%. Finally, CPI ex food and energy – which is often called “Core-Core CPI” also fell to 3.1% in January from 3.5% in December 2023

• Tokyo Core CPI decreased 0.2% m-o-m and increased 1.6 % y-o-y (expected +1.9%)

8th Jan 2024

Key takeaway: Tokyo inflation fell in line with expectations in December moderating from 2.7% in November to 2.4% in December. The more important Core CPI measure which excludes Fresh Food also moderated from 2.3% to 2.1%. Month over month core CPI increased 0.1% from November. Tokyo CPI is released ahead of the nation wide data and generally expected to track national numbers. Inflation has be generally been moderating in Japan in line with other global trends on the back of improving supply chains and falling energy prices. Japan inflation is closely watched by fixed income and currency markets worldwide given its impact on the future path of Japanese monetary policy.  

• Tokyo Core CPI increased 0.1% m-o-m and 2.1% y-o-y (expected 2.1%)