What was Tokyo's annual core inflation rate in May, and how does it compare to the Bank of Japan's target and recent trends?

Tokyo's annual core inflation rate (excluding fresh food) was 1.3% in May, staying below the Bank of Japan's 2% target for a fourth consecutive month. This marked a slowdown from 1.5% in April and was lower than the median market expectation of 1.5%, representing the sixth straight month of deceleration. The slowdown was largely attributed to government subsidies on utility bills and tuition fees, which offset upward pressure from rising raw material costs linked to the U.S.-Israeli war on Iran.

Why is the Tokyo core CPI considered significant for the Bank of Japan's upcoming policy decision, and what is the market expecting?

The Tokyo core CPI is viewed as a leading indicator of nationwide price trends, making it a key input for the Bank of Japan’s policy deliberations — particularly ahead of its next meeting, where markets expect the BOJ to raise its short-term policy rate from 0.75% to 1%. This expectation reflects mounting inflationary pressures despite the recent slowdown, including surging oil prices and higher import costs driven by a weak yen. Although the BOJ kept rates steady in April, it signaled a near-term hike, and having exited its decade-long stimulus in 2024, it has already raised rates several times — most recently in December — aiming to sustainably achieve its 2% inflation target.

Core inflation in Tokyo slows, stays below BOJ goal

May 28, 2026

Tokyo's core inflation slowed to 1.3% in May, below the Bank of Japan's 2% target despite rising raw material costs. Analysts expect acceleration due to surging oil prices and a weak yen pressuring the central bank to raise rates.

reuters

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