| Consensus | Consensus Range | Actual | Previous | |
| CPI - Y/Y | 1.7% | 1.4% to 1.8% | 1.7% | 1.4% |
| Ex-Fresh Food - Y/Y | 1.6% | 1.4% to 1.7% | 1.6% | 1.3% |
| Ex-Fresh Food & Energy - Y/Y | 1.8% | 1.6% to 1.9% | 1.9% | 1.6% |
Highlights
Consumer inflation in Tokyo, a leading indicator of the national trend, picked up in June as the year-on-year increase in processed food prices continued to moderate and the fall in gasoline prices shrank compared to June 2025 when the rise in fuel costs eased. It followed a sharp deceleration in May, when the city began a four-month program to wave its base water charges (some households receive the benefit from June). The initial impact of the temporary relief measure already faded this month as the metropolitan government had a similar scheme last summer.
All three key CPI measures remain below the Bank of Japan's 2% target as revived fuel subsides have capped gasoline and diesel prices nationwide. In addition to city water subsides, families in the Tokyo metropolitan area also benefit from free daycare services.
The core measure (excluding fresh food) posted a 1.6% rise on year after the annual rate slowed further to 1.3% in May from 1.5% in April, both the lowest since 0.8% in March 2022. The core rate hit a recent peak at 3.6% in May 2025 when processed food price hikes were sharp in the aftermath of domestic rice shortages.
The annual rate of the total CPI also rose to 1.7% after easing to 1.4% in May from 1.5% in April. The year-on-year increase in the core-core CPI (excluding fresh food and energy), which is not directly impacted by fuel subsidies, climbed to 1.9% after slowing to 1.6% in May from 1.9% in the prior month.
For a clearer trend in consumer inflation, BOJ officials have stressed that they are focused more on 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.
Citing growing upside risks to inflation triggered by the Mideast conflict, the bank's nine-member board minus Governor Kazuo Ueda, who was temporarily hospitalized for medical treatment, decided to raise the target for the overnight interest rate to 1% from 0.75% in a 7 to 1 vote at its June 15-16 meeting. The fifth rate hike in the current cycle that began in March 2024 is part of the gradual process to unwind large-scale monetary easing.
Details:
Japan June Tokyo core CPI (ex-fresh food) +1.6% y/y (May +1.3%), median forecast +1.6% (range: +1.4% to +1.7%)
Japan June Tokyo total CPI +1.7% y/y (May +1.4%); median forecast +1.7% (range: +1.4% to +1.8%)
Japan June Tokyo core-core CPI (ex-fresh food, energy) +1.9% y/y (May +1.6%); median forecast +1.8% (range: +1.6% to +1.9%)
Japan June Tokyo CPI: Energy -2.3% y/y (-0.13 point contribution), vs. -3.7% (-0.20 point) in May
Japan June Tokyo CPI: Processed food +3.9% (+0.93 point) vs. +4.1% (+0.98 point) in May
Japan June Tokyo inflation rate picks up as the base effect of slowing processed food price gains begins to fade, while fuel price increases eased in June 2025
Japan June Tokyo CPI rate also rises as the initial impact of free city water base charges seen in May disappears; Tokyo had a similar program in summer 2025
Market Consensus Before Announcement
Tokyo’s consumer price index, a leading indicator of the national inflation trend, is expected to accelerate in June, reflecting higher energy costs and supply concerns surrounding naphtha, other oil products and chemicals amid heightened geopolitical tensions in the Middle East following the conflict involving the United States and Iran.
The closely watched core CPI, which excludes fresh food, is expected to accelerate for the first time in eight months in June. The core CPI is forecast to gain 1.6 percent on the year in June, up from a 1.3 percent increase in May, when it recorded its slowest pace since March 2022. Core inflation has decelerated sharply from the 3.6 percent rise posted in May 2025.
Despite easing food inflation, the impact of rising global commodity prices is beginning to filter through to consumer prices. Government measures to cap gasoline prices at around ¥170 per liter and the Tokyo metropolitan government’s decision to waive water charges for all households during the summer are expected to help limit upward inflation pressure, but are unlikely to fully offset the impact of higher import costs.
The other key inflation measures are also expected to advance. The overall CPI is forecast to increase 1.7 percent on the year in June, compared with a 1.4 percent rise in May. The June level is expected to be the highest since December, when it posted a 2.0 percent rise. The core-core index, which excludes both fresh food and energy, is expected to rise 1.8 percent, up from 1.6 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.
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.