| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.5% | 1.4% to 1.6% | 1.5% | 1.4% |
| Ex-Fresh Food - Y/Y | 1.4% | 1.4% to 1.5% | 1.4% | 1.4% |
| Ex-Fresh Food & Energy - Y/Y | 1.9% | 1.7% to 2.0% | 1.8% | 1.9% |
Highlights
Japan's consumer inflation remained subdued in May, below the Bank of Japan's 2% price stability target, thanks to fuel subsidies aimed at easing the impact of the Mideast conflict as well as free high school education that took effect in April. Processed food price hikes continued slowing after serious domestic rice shortages were resolved last year. Residents in the Tokyo metropolitan area are also benefiting from a four-month program to wave base city water charges during the summer, from May for some households and June for others. Free daycare services in Tokyo are also helping to slow overall inflation.
The year-on-year increase in the core CPI (excluding fresh food) stood at 1.4% after decelerating sharply to 1.4% in April from 1.8% in Mach. The Iran war drove the national average regular gasoline price to a record high in mid-month, just before renewed subsidies took effect to cap fuel price markups. The recent core rate is the slowest since +0.8% seen in March 2022.
The annual rate of the total CPI was 1.5%, little changed from 1.4% in April and 1.5% in March. The recent total CPI inflation is also the smallest gain since March 2022, when it was 1.2%, which was followed by a spike to 2.5% a month later (the core CPI rose 2.1%) as the world felt the full impact of Russia's invasion of Ukraine that triggered a surge in energy and commodities prices amid supply disruption concerns.
Underlying inflation, as measured by the core-core CPI that exclude fresh food and energy, stood at 1.8%, easing further from 1.9% in April and 2.4% in March. It is well below the recent peak of 3.4% reached in June 2025 and the lowest since 1.8% in September 2022.
In the May CPI report, too, private high school tuition fees plunged 68.8% on year that trimmed the overall consumer price rise by 0.18 percentage point after falling 68.8% (-0.18 point) in April, when the decline accelerated drastically from a 10.6% drop (-0.03 point) in March. As seen in the previous month, the decline was partly offset by a slight increase in public education costs, following the end of the 12-month price-cutting base effect of free tuition fees from grade 10 to 12 at a national level that began on April 1, 2025.
Details:
Japan May core CPI (excluding fresh food) +1.4% y/y, 57th straight rise (Apr +1.4%); median forecast +1.4%
Japan May total CPI +1.5% y/y, 57th straight rise (Apr +1.4%); median forecast +1.5%
Japan May core-core CPI (ex-fresh food, energy) +1.8% y/y, 50th straight rise (Apr +1.9%); median forecast +1.9%
Japan May inflation remains subdued on fuel subsidies, slowing processed food markups, private high school tuition drop
Japan May CPI: Processed food +3.5% (+0.87 point) vs. +4.1% (+1.01 pt) in Apr
Japan May CPI: Energy prices -2.5% y/y (-0.20 point vs. -3.9% (-0.31 pt) in Apr
Japan May CPI services (ex-owners' equivalent rent) +1.3% vs. +1.2% in Apr; goods (ex-fresh food) +1.8% vs. +1.9% in Apr
Japan May CPI: Services prices catching up with goods inflation amid continued wage hikes into fiscal 2026 (April start) but real wage growth weak
Market Consensus Before Announcement
Japan’s nationwide core consumer price index, which excludes fresh food, is expected to be little changed on the year in May, but is likely to remain below the Bank of Japan’s 2 percent inflation target for a fourth consecutive month.
Mirroring the trend seen in the Tokyo CPI released on May 29, consumer inflation continued to decelerate amid slower food price growth and the effects of government gasoline subsidies. In addition, the Tokyo government's policy of waiving basic water service charges during the summer, starting in May, as well as reductions in early childcare costs, including nursery school fees, contributed to a further easing in inflation.
These measures have helped restrain inflationary pressures even as geopolitical tensions in the Middle East have pushed up international oil and other commodity prices. The tensions have also weighed on the yen, raising import costs and creating upward pressure on domestic prices.
The core CPI is expected to be unchanged at a 1.4 percent rise on the year in May, while the overall CPI is forecast to rise 1.5 percent after increasing 1.4 percent in April. Core-core CPI, which excludes both fresh food and energy, is also expected to remain unchanged, rising 1.9 percent from a year earlier in May.
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.