| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.6% | 1.5% to 1.7% | 1.5% | 2.1% |
| Ex-Fresh Food - Y/Y | 2.1% | 2.0% to 2.1% | 2.0% | 2.4% |
| Ex-Fresh Food & Energy - Y/Y | 2.7% | 2.6% to 2.8% | 2.6% | 2.9% |
Highlights
Japan's consumer inflation decelerated further in all three key measures in January, thanks to falling prices for gasoline and a much slower pace of processed food price hikes now that domestic rice supply shortages have been resolved. The government abolished a decades-old temporary gasoline surcharge at the end of December whose price-cutting impact emerged in January.
The year-on-year increase in the core CPI (excluding fresh food) eased to a two-year low of 2.0% in January, down from 2.4% in December and 3.0% in November. It is the lowest since 2.0% in January 2024 and coming in line with the Bank of Japan's target to guide inflation to around 2% in the long run.
The annual rate of the total CPI slowed sharply to a 46-month low of 1.5% from 2.1% in December and 2.9% in the prior month. The prices of fresh vegetables and fruits surged in early 2025 on poor crops of 2024 but have now shown a pullback, cooling off the overall inflation rate. Those prices fell 6.9% on year in January vs. -2.7% in December. Underlying inflation, as measured by the core-core CPI that excludes both fresh food and energy, eased further to 2.6% from 2.9%.
Details:
Japan Jan core CPI (excluding fresh food) +2.0% y/y, 53rd straight rise (Dec +2.4%); median forecast +2.1%
Japan Jan total CPI +1.5% y/y, 53rd straight rise (Dec +2.1%); median forecast +1.6%
Japan Jan core-core CPI (ex-fresh food, energy) +2.6% y/y, 46th straight rise (Dec +2.9%); median forecast +2.7%
Japan Jan core inflation continues to slow on energy price drop, slower processed food rise
Japan Jan total CPI y/y rise slows sharply also on larger fresh food price drop vs. Dec
Japan Jan CPI: processed food +6.2% (+1.49 point) vs. +6.7% (+1.62 pt) in Dec
Japan Jan CPI: energy prices -5.2% y/y (-0.42 point) vs. -3.1% (-0.25 pt) in Dec
Japan Jan CPI services (ex-owners' equivalent rent) +1.8% vs. +1.9% in Dec; goods (ex-fresh food) +2.5% vs. +3.2% in Dec
Japan Jan CPI continues to show wage growth slowly spreading, seen in services price gains but still behind goods inflation
Market Consensus Before Announcement
Japan’s nationwide consumer inflation is expected to continue rising, but the pace of gains is seen slowing further in January after sharp declines across the three key measures the previous month, as softer food and energy prices, along with lower electricity and gas prices, weighed on inflation growth.
The core consumer price index (CPI), which excludes fresh food, is expected to rise 2.1 percent from a year earlier in January, marking a 53rd consecutive increase but the slowest pace since January 2024. The CPI stood at 2.4 percent in December and had eased from 3.0 percent in both October and November.
Among the other major measures, the headline CPI is projected to rise about 1.6 percent in January, slowing for a third straight month from 2.1 percent in December and slipping below the Bank of Japan’s inflation target. The core-core CPI, which excludes both fresh food and energy, is expected to rise about 2.7 percent, down from 2.9 percent in December, when it fell below the 3 percent mark for the first time in nine months since March.
The nationwide trend reflects developments in Tokyo, whose CPI figures were released Jan. 30. The headline CPI in the capital rose 1.5 percent from a year earlier in January from 2.0 percent in December and marking the lowest increase since 1.3 percent in March 2022.
Tokyo’s CPI excluding fresh food rose 2.0 percent year on year in January from 2.3 percent in December. The index excluding both fresh food and energy rose 2.4 percent, easing from 2.6 percent the previous month.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Annual changes in the CPI represent the rate of inflation.
Description
The CPI has been in the spotlight as Japan struggled to make its way out of deflation. The report tracks changes in the price of a basket of goods and services that a typical Japanese household might purchase. The preferred measure is the year over year percent change. Markets will typically pay more attention to the core measure that excludes only fresh food because volatile food prices can distort overall CPI. A second core measure that excludes energy as well is also available. As the most important inflation indicator, the CPI data are closely monitored by the Bank of Japan. Rising consumer prices may prompt the BoJ to raise interest rates in order to manage inflation and slow economic growth. Higher interest rates make holding the yen more attractive to foreign investors, and this higher level of demand will place upward pressure on the value of the yen.
An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.