| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.6% | 1.4% to 1.6% | 1.4% | 1.6% |
| Ex-Fresh Food - Y/Y | 1.8% | 1.6% to 1.9% | 1.7% | 1.8% |
| Ex-Fresh Food & Energy - Y/Y | 2.4% | 2.2% to 2.5% | 2.3% | 2.5% |
Highlights
Consumer inflation in Tokyo, a leading indicator of the national trend, remains tame below the Bank of Japan's 2% target in two of the three key measures in March as energy prices were capped by subsidies aimed at lowering electricity bills during the peak heating season, offsetting the impact of a temporary spike in gasoline prices caused by the Mideast conflict. Looking ahead, renewed fuel subsidies are set to bring down gasoline and heating oil prices again in April data, which in turn should help cool off energy and thus overall inflation. Processed food price gains have been slowing after domestic rice supply shortages were resolved last year.
The core measure (excluding fresh food) rose 1.7% on year, a nearly two-year low, after the annual rate slid to a 16-month low of 1.8% in February from 2.0% in January. The annual rate of the total CPI eased back to a four-year low of 1.4% from 1.5% the previous month, which was revised down from 1.6%. The year-on-year increase in the core-core CPI (excluding fresh food and energy) moderated to 2.3% after rising to 2.5% in February from 2.4% the prior month.
Two of the key inflation measures are now below the Bank of Japan's 2% price stability target but that was already projected by the bank in October as the rice price markups had eased after a spike in early 2025. The bank repeated its quarterly Outlook Report in January that in the second half of its projection period (fiscal 2025 through fiscal 2027), underlying CPI inflation and the rate of increase in the core CPI should increase gradually and will be at a level that is generally consistent with the price stability target.
Details:
Japan March Tokyo core CPI (ex-fresh food) +1.7% y/y (Feb +1.8%), median forecast +1.8% (range: +1.6% to +1.9%)
Japan Mar Tokyo core CPI annual rate at 1.7%, lowest since 1.6% in Apr 2024
Japan March Tokyo total CPI +1.4% y/y (Feb revised to +1.5% from +1.6%); median forecast +1.6% (range: +1.4% to +1.6%)
Japan Mar Tokyo total CPI annual rate at 1.4%, lowest since 1.3% in Mar 2022
Japan March Tokyo core-core CPI (ex-fresh food, energy) +2.3% y/y (Feb +2.5%); median forecast +2.4% (range: +2.2% to +2.5%)
Japan March Tokyo core, total CPI slow y/y further as renewed subsidies for electricity and scrap of gasoline surcharge at end-2025 continue to work
Japan Mar Tokyo CPI gasoline price y/y drop eases to -1.0% from -14.7% in Feb as Iran war pushed up crude prices by mid-Mar when stats conducted
Japan March Tokyo CPI: energy -7.5% y/y (-0.39 point contribution), vs. -9.2% (-0.47 point) in Feb
Japan March Tokyo CPI: processed food +4.9% (+1.14 point) vs. +5.5% (+1.28 point) in Feb
Market Consensus Before Announcement
Consumer inflation in Tokyo, a leading indicator of nationwide price trends, is expected to be largely unchanged in March after easing in two key readings over the last three months even as some price gains, such as for household durable goods. Prices have been weighed down by the government subsidies aimed at easing the burden of gasoline and electricity costs.
Retail prices at supermarkets in early March showed a deceleration trend, while the national average regular gasoline price hit a record high in mid-March amid worsening tensions in the Middle East. Still, the direct impact of the Middle East situation appears limited in March, keeping the core CPI, which excludes fresh food, below the Bank of Japan's inflation target of 2 percent for the second straight month.
The core CPI is expected to be flat at a rise of 1.8 percent on the year in March after hitting a 16-month low of 1.8 percent in February. Elsewhere, the total CPI is expected to be unchanged at 1.6 percent on the year in March from a month earlier. The core-core index, which excludes fresh food and energy, is seen slowing to a 2.4 percent rise from 2.5 percent in February.
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.