| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 2.0% | 1.9% to 2.1% | 1.9% | 1.9% |
| Ex-Fresh Food - Y/Y | 1.8% | 1.8% to 2.0% | 1.7% | 1.8% |
| Ex-Fresh Food & Energy - Y/Y | 2.0% | 1.9% to 2.2% | 1.9% | 1.9% |
Highlights
Japan’s consumer inflation was steady to slightly easier in August as utility and fuel subsidies caused overall energy prices to dip again after posting their first rise in many months in July while processed food price markups eased. Hotel fees dropped from a year earlier, when the six-month-long Osaka Expo through mid-October pushed up accommodations costs. This factor partly offset the effect of higher mobile communications charges.
All three key CPI measures remain just below the Bank of Japan’s 2% target. The government is trying to support households during the peak summer heat from July to September is lowering electricity and natural gas bills from August onward. Fuel subsides have also capped gasoline and diesel prices since mid-March. In addition to city water subsides, families in the Tokyo metropolitan area also benefit from free daycare services.
The year-on-year increase in the core CPI (excluding fresh food) unexpectedly eased slightly to 1.7% after accelerating to a six-month high of 1.8% in July and rising to 1.6% in June from 1.4% in May. It remains tame compared to a recent peak of 3.7% hit in May 2025.
The annual rate of the total CPI was steady at 1.9% after firming to a seven-month high of 1.9% and edging up to 1.6% in June from 1.5% in May. Overall inflation has come down gradually from 4.0% at the start of 2025.Underlying inflation, as measured by the core-core CPI that exclude fresh food and energy, also stood at 1.9% after rising to 1.9% in July and easing to 1.7% in June from 1.8% in May. It is well below the recent peak of 3.4% reached in June 2025.
Looking ahead, consumer prices are expected to remain under upward pressure. Many firms plan to reflect higher import and labor costs in retail prices further. The yen has firmed in recent trading but remains below its year-earlier levels, keeping imports expensive.
Details:
Japan Aug core CPI (excluding fresh food) +1.7% y/y, 60th straight rise (July +1.8%); median forecast +1.9%
Japan Aug total CPI +1.9% y/y, 60th straight rise (July +1.9%); median forecast +2.0%
Japan Aug core-core CPI (ex-fresh food, energy) +1.9% y/y, 53rd straight rise (July +1.9%); median forecast +2.1%
Japan Aug core inflation slows as utility, fuel subsidies cause energy prices to slip back, processed food markups continue to ease, hotel fees drop
Japan Aug CPI: processed food +2.7% (+0.64 point) vs. +3.0% (+0.72 pt) in July
Japan Aug CPI: energy prices -0.7% y/y (-0.05 point) vs. +0.6% (+0.05 pt) in July
Japan Aug CPI services (ex-owners’ equivalent rent) +1.5% vs. +1.5% in July; goods (ex-fresh food) +2.4% vs. +2.4% in July
Market Consensus Before Announcement
Japan’s nationwide core consumer price index (CPI), which excludes fresh food, is expected to remain steady in August from the previous month, while the two other key inflation measures are expected to edge up to the Bank of Japan’s 2 percent inflation target. The government’s latest subsidies for electricity and gas charges took effect during the month and may have helped curb inflation, while the weak yen continued to boost import costs, with fresh food prices and rents also showing signs of climbing.
The uptrend in consumer inflation is becoming clearer as rising energy costs amid prolonged tensions in the Middle East and the yen’s weakness push up import costs. Prices are also climbing as shops pass higher labor, materials, packaging and transportation costs on to consumers amid widespread worker shortages and elevated import costs in the resource-poor country.
The core CPI is expected to rise 1.8 percent on the year in August, little changed from the previous month. It accelerated from a 1.6 percent increase in June and 1.4 percent in both April and May, the lowest level since March 2022.
The other two key consumer inflation readings are expected to climb to the BOJ’s target. The total CPI is expected to rise to 2.0 percent in August from 1.9 percent a month earlier, while the core-core CPI, which excludes fresh food and energy, is also forecast to advance to 2.0 percent from 1.9 percent in July.
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.