Japan Core Inflation Remains at Over 4-Year Low

Japan’s core consumer price index, which excludes fresh food but includes energy, rose 1.4% year-on-year in May 2026, in line with both the previous figure and market forecasts. Still, the latest reading marked the lowest level since March 2022 and remained below the Bank of Japan’s 2% target for a fourth 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 is closely watched by the Bank of Japan as a better gauge of demand-driven price movements, rose 1.8% year-on-year in May, marking the softest increase since September 2022. The BoJ raised interest rates by 25 bps to their highest level since September 1995 at its June meeting, marking the first rate hike since last December, to prevent higher oil prices from fueling inflation.

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