| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.8% | 1.6% to 1.9% | 1.5% | 2.0% |
| Ex-Fresh Food - Y/Y | 2.2% | 2.1% to 2.2% | 2.0% | 2.3% |
| Ex-Fresh Food & Energy - Y/Y | 2.6% | 2.4% to 2.6% | 2.4% | 2.6% |
Highlights
Consumer inflation in Tokyo, a leading indicator of the national trend, continues moderating to around the Bank of Japan's 2% price stability target in all three key measures in January, thanks to falling prices for gasoline and a much slower pace of processed food price hikes. The government abolished a decades-old temporary gasoline surcharge at the end of December whose price-cutting impact is set to emerge this 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.
The core measure (excluding fresh food) posted a 15-month low of 2.0% increase on the year after the annual rate decelerated sharply to 2.3% in December from 2.8% in November. The total CPI plunged to a nearly four-year low of 1.5% y/y, down further from 2.0% in December and 2.7% in November. The annual rate for the core-core CPI (excluding fresh food and energy), which is little affected by fluctuations in a series of energy subsidies and tax code changes, eased to 2.4% from 2.6%.
Details:
Japan Jan Tokyo core CPI (ex-fresh food) +2.0% y/y (Dec +2.3%), median forecast +2.2% (range: +2.1% to +2.2%)
Japan Jan Tokyo core CPI annual rate at 2.0% lowest since 1.8% in Oct 2024
Japan Jan Tokyo total CPI +1.5% y/y (Dec +2.0%); median forecast +1.8% (range: +1.6% to +1.9%)
Japan Jan Tokyo total CPI annual rate at 1.5% lowest since 1.3% in Mar 2022
Japan Jan Tokyo core-core CPI (ex-fresh food, energy) +2.4% y/y (Dec +2.6%); median forecast +2.6% (range: +2.4% to +2.6%)
Japan Jan Tokyo CPI y/y slows further on energy price drop, slower processed food rise; total CPI eases also on lower fresh food prices
Japan Jan Tokyo CPI sees price-cutting impact of government scrapping decades-old 'temporary' gasoline surcharge at end-Dec
Japan Jan Tokyo CPI: energy -4.2% y/y (-0.22 point contribution) vs. -3.4% (-0.19) in Dec
Japan Jan Tokyo CPI: processed food +5.6% (+1.30 point) vs. +6.2% (+1.43 point) in Dec
Japan Jan Tokyo CPI: regular rice price at +25.5% (+0.13 point on total CPI) y/y from +35.3% (+0.17 point) in Dec; rice price sharply lower from early 2025
Market Consensus Before Announcement
The Tokyo consumer price index, a leading indicator of nationwide inflation trends, is expected to decelerate further on the year in January, with two of the three key measures easing from the previous month as slower food and energy prices help bring inflation closer to, or even below, the Bank of Japan’s 2 percent target.
The expected slowdown in inflation is driven mainly by food prices, including declines in fresh food and rice prices. Energy prices fell following cuts in electricity and gas charges, while the abolition of the temporary gasoline tax surcharge pushed gasoline prices sharply lower. In addition, there were signs that prices at supermarkets and other retailers softened during the month.
The core measure (excluding fresh food) is forecast to rise 2.2 percent on the year in January, easing from 2.3 percent in December, while the total CPI is seen slipping below the 2 percent mark to 1.8 percent, down from a 2.0 percent increase a month earlier. The core-core index (excluding fresh food and energy) is projected to be unchanged at a 2.6 percent rise. All three measures have remained below 3 percent since June after retreating from earlier peaks.
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.
The Tokyo CPI data covers consumer prices in the capital’s 23 wards located in the eastern part of the Tokyo Prefecture but excludes the 26 cities and other smaller municipalities that occupy larger areas in other parts of the province (islands in the Pacific Ocean are also excluded). It is a leading indicator of the national average CPI as it is released about a month ahead of the national data. The survey for the Tokyo CPI is conducted on one day around the 12th (Wednesday, Thursday or Friday) each month and its results are released toward the end of the same month or early in the following month.
The national CPI has a larger energy weight of 712 out of 10,000, compared to 470 in the Tokyo data, because the shares of consumption of electricity, gasoline and heating oil tend to be bigger in the rural areas. There is only a slight difference in the weighting of food excluding perishables between the national data (2,230) and the Tokyo data (2,144).
Description
The CPI has been in the spotlight as Japan struggled to make its way out of deflation. It is now closely monitored because the recent spike in energy and commodity markets and supply chain constraints during the global pandemic boosted Japan’s inflation rate to the highest in over four decades in 2022.
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.