| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.6% | 1.6% to 1.7% | 1.7% | 1.5% |
| Ex-Fresh Food - Y/Y | 1.6% | 1.5% to 1.7% | 1.6% | 1.4% |
| Ex-Fresh Food & Energy - Y/Y | 1.7% | 1.6% to 1.9% | 1.7% | 1.8% |
Highlights
Japan’s consumer inflation accelerated slightly in July due to a smaller drop in gasoline prices and larger markups in other fuels, which limited the impact of a continued moderation in processed food markups. All three key CPI measures remain below the Bank of Japan’s 2% target, thanks to fuel subsides since mid-March and free high school education that took effect in April, both of which are partly offsetting the impact of rising costs of imports due to the weak yen, labor amid widespread worker shortages and transportation and packaging triggered by the Iran war.
The year-on-year increase in the core CPI (excluding fresh food) accelerated to 1.6%, as expected, after being unchanged at 1.4% in May and decelerating sharply to a four-year low of 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-March, just before renewed subsidies took effect to cap retail prices of gasoline and diesel oil.
The annual rate of the total CPI also firmed to 1.7% (consensus +1.6%) after rising to 1.5% in May from 1.4% in April and 1.5% in March. The April rate was the lowest 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 1.7%, easing further from 1.8% in May, 1.9% in April and 2.4% in March. It is well below the recent peak of 3.4% reached in June 2025 and remains the lowest since 1.8% in September 2022.
Residents in the Tokyo metropolitan area are benefiting from free daycare services as well as a four-month program to wave base city water charges during the peak of the summer, from May for some households and June for others. The effects of those fiscal measures, however, are limited in the national average CPI.
For a clearer trend in consumer inflation, BOJ officials are closely watching the bank’s own core measures that exclude the effects of institutional factors (sales tax cuts, energy subsidies, etc.), which are pointing to an uptrend in underlying inflation above the bank’s 2% target. But the bank is in no hurry to follow up with a back-to-back rate hike in the face of downside risks to consumer spending and business investment. The fate of a U.S.-Iran ceasefire remains uncertain, pending the safe reopening of the Strait of Hormuz, the crucial pathway for energy and commodities exports from the Mideast Gulf.
The BOJ’s nine-member board is widely expected to stand pat at its next meeting on July 30-31 after it decided to raise the target for the overnight interest rate to 1% from 0.75% in a 7 to 1 vote in June, citing growing upside risks to inflation triggered by the Mideast conflict. The bank is expected to raise rates further by year-end. The rate hike in June is the fifth in the current cycle that began in March 2024 and part of the gradual process to unwind large-scale monetary easing that lasted for about a decade since April 2013.
Details:
Japan June core CPI (excluding fresh food) +1.6% y/y, 58th straight rise (May +1.4%); median forecast +1.6%
Japan June total CPI +1.7% y/y, 58th straight rise (May +1.5%); median forecast +1.6%
Japan June core-core CPI (ex-fresh food, energy) +1.7% y/y, 51st straight rise (May +1.8%); median forecast +1.7%
Japan June inflation picks up as overall energy price drop shrinks to nearly flat y/y; gasoline price drop eases, propane, diesel markups accelerate
Japan June CPI: medical bills up after recent drop but its effect offset by slower gain in mobile communications fees
Japan June CPI: processed food +3.1% (+0.78 point) vs. +3.5% (+0.87 pt) in May
Japan June CPI: energy prices -0.1% y/y (-0.01 point) vs. -2.5% (-0.20 pt) in May
Japan June CPI services (ex-owners' equivalent rent) +1.2% vs. +1.3% in May; goods (ex-fresh food) +2.1% vs. +1.8% in May
Market Consensus Before Announcement
Japan’s core consumer price index (CPI), which excludes fresh food, is expected to accelerate for the first time in eight months, reflecting the trend in Tokyo, which is a leading indicator of the nationwide data.
Tokyo CPI, announced on June 26, picked up in June as the year-on-year increase in processed food prices continued to moderate and the decline in gasoline prices narrowed compared with June 2025, when fuel cost increases eased.
Geopolitical tensions in the Middle East have pushed international oil and other commodity prices higher. The ongoing weakness of the yen against the dollar raised import costs and added upward pressure on domestic prices.
Still, the three key readings of the nationwide CPI are expected to remain below the Bank of Japan’s 2 percent inflation target for a third consecutive month in June, as slower food price increases and government measures, including subsidies for gasoline, continue to weigh on consumer prices.
The core CPI, which excludes fresh food, is expected to remain below the 2 percent inflation target for the fifth consecutive month, rising 1.6 percent on the year in June after increasing 1.4 percent in both May and April. The overall CPI is seen rising 1.6 percent after increasing 1.5 percent in May. Core-core CPI, which excludes both fresh food and energy, is expected to rise 1.7 percent in June after increasing 1.8 percent 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.