| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.5% | 1.3% to 1.5% | 1.3% | 1.5% |
| Ex-Fresh Food - Y/Y | 1.7% | 1.6% to 1.8% | 1.6% | 2.0% |
| Ex-Fresh Food & Energy - Y/Y | 2.7% | 2.6% to 3.0% | 2.5% | 2.6% |
Highlights
Japan's consumer inflation continued moderating in the core measure in February as energy prices were pulled down by renewed subsidies for electricity in the first three months of the year aimed at reducing heating costs while processed food price hikes have been easing in tandem with fading effects of domestic rice supply shortages. Energy prices were already down in January after the government scrapped a decades-old gasoline surcharge at the end of December.
The year-on-year increase in the core CPI (excluding fresh food) eased to a nearly four-year low of 1.6%, down from 2.0% in January and 2.4% in December. It remains the lowest since 0.8% in March 2022 and below the Bank of Japan's target to guide inflation to around 2% in the long run.
The annual rate of the total CPI also eased to 1.3% after decelerating sharply to 1.5% in January (the lowest since 1.2% in March 2022) from 2.1% in December. 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.
Underlying inflation, as measured by the core-core CPI that excludes both fresh food and energy, unexpectedly edged down to 2.5% (the median forecast was for 2.7%) after easing to 2.6% in January from 2.9% the previous month.
Details:
Japan Feb core CPI (excluding fresh food) +1.6% y/y, 54th straight rise (Jan +2.0%); median forecast +1.7%
Japan Feb core CPI remains lowest since March 2022, when it stood at 0.8%
Japan Feb total CPI +1.3% y/y, 54th straight rise; median forecast +1.5%
Japan Feb core-core CPI (ex-fresh food, energy) +2.5% y/y, 47th straight rise (Jan +2.6%); median forecast +2.7%
Japan Feb inflation continues to slow on energy price drop, slower processed food rise
Japan Feb CPI: processed food +5.7% (+1.39 point) vs. +6.2% (+1.49 pt) in Jan
Japan Feb CPI: energy prices -9.1% y/y (-0.71 point vs. -5.2% (-0.42 pt) in Jan
Japan Feb CPI services (ex-owners' equivalent rent) +1.8% vs. +1.8% in Jan; goods (ex-fresh food) +1.7% vs. +2.5% in Jan
Market Consensus Before Announcement
Japan’s nationwide core consumer price index is expected to decelerate for the third straight month in February, with the year-on-year rate of increase seen saying at a nearly four-year low, driven by lower energy prices and the government’s measures to curb utility costs, in line with the trend seen in Tokyo late last month. Still, the underlying uptrend in consumer inflation remains intact amid continued strength in overall food prices, although they have shown signs of easing in recent months.
The core CPI, which excludes fresh food, is seen rising 1.7% on the year in February after a 2.0% increase a month earlier. Core inflation is set to fall below the Bank of Japan’s (BOJ) 2.0% target for the first time since March 2022, marking its lowest level in almost four years. This also represents a sharp slowdown from 3.0% recorded in October and November.
Two other key measures are expected to be little changed to slightly higher. Total CPI is projected to be unchanged, rising 1.5% on the year in February, the same pace as a month earlier. The core-core CPI, which excludes both fresh food and energy, is seen inching up to 2.7% from 2.6% in January.
The nationwide trend reflects developments in Tokyo, where core prices have been trending lower as energy costs are pushed down by renewed subsidies for electricity and natural gas in the first three months of the year, aimed at reducing heating costs. Energy prices had already declined in January after the government scrapped a decades-old gasoline surcharge at the end of December.
Looking ahead, the country’s consumer inflation outlook requires close attention amid heightened geopolitical risks following the latest developments in the Middle East, including the U.S. and Israel’s attack on Iran. At its policy meeting on March 19, the BOJ kept its monetary policy unchanged, maintaining the overnight interest rate target at 0.75%. The central bank also noted the need to closely monitor the impact of rising geopolitical tensions on global financial markets, which have become increasingly volatile amid sharp swings in oil prices.
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.