Tokyo Core Inflation Falls Below Bank of Japan 2% Target
Tokyo core inflation slowed to 1.8% in February as food price hikes eased. The figure fell below the central bank target for the first time since October 2024.
Annual core inflation in the capital of Japan slowed in February as the impact of previous food price increases began to fade. This development offers some relief to households but introduces new complexities for the Bank of Japan as it seeks to communicate the necessity of further interest rate hikes. According to official data, the Tokyo core consumer price index, which excludes volatile fresh food prices, rose 1.8% in the year to February. This marks a decrease from the 2.0% gain recorded in January and is the first time the figure has dipped below the central bank's 2% target since October 2024. The result was slightly higher than the 1.7% increase predicted by market analysts. The slowdown is consistent with the central bank's forecast that inflation would temporarily ease due to fuel subsidies and base effects from the previous year before eventually reaccelerating on the back of rising wages. An alternative index that excludes both fresh food and fuel—often used to identify broader price trends—rose 2.5% in February, up from 2.4% in the prior month. The central bank recently raised interest rates to 0.75%, the highest level in three decades, signaling confidence that the economy is moving toward a sustainable 2% inflation environment. Policymakers have indicated they remain prepared to adjust rates further should economic conditions and price trends align with their current projections.
