Sat, Feb 21, 2026 page6

• Japan CPI cools to slowest pace in two years

  2 PERCENT GAIN: Softer food inflation and government measures to reduce fuel costs were the two main drivers of the inflation slowdown, an economist said

  • Bloomberg
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  Japan’s key inflation gauge eased to the slowest pace in two years, posing a communication challenge for a central bank that would likely stay determined to raise the benchmark interest rate when the timing is right.

  Consumer prices excluding fresh food rose 2 percent from a year earlier last month, the smallest gain since January 2024, the Japanese Ministry of Internal Affairs and Communications said yesterday.

  That matched the median economist forecast and came after the gauge climbed 2.4 percent in the previous month.

  

  Pre-made meals are sold at a Seiyu store in Tokyo on Wednesday last week.

  Photo: Reuters

  The measure that also strips out energy to reflect underlying strength increased 2.6 percent, well above the Bank of Japan’s (BOJ) 2 percent target.

  Overall inflation that includes everything dropped to 1.5 percent, slipping below 2 percent for the first time since March 2022.

  The data show that price growth in Japan has entered a slightly cooler phase compared with last year thanks in part to Japanese Prime Minister Sanae Takaichi’s fiscal measures aimed at easing costs of living.

  A historic surge pushed the pace of inflation excluding fresh food to 3.1 percent last year, the fourth straight year above 2 percent.

  Temporary factors and food prices drove the slowdown. Government steps to reduce fuel costs through tax measures helped push overall energy prices 5.2 percent lower last month.

  The price advance for food excluding fresh goods also slowed due in part to comparisons with a year earlier.

  “Softer food inflation and lowered gasoline prices were the two main drivers for the inflation slowdown this time,” said Taro Saito, head of economic research at NLI Research Institute. “It’s almost certain that core CPI will go below 2 percent from the next data set, as the impact of government utility measures kicks in.”

  The yen weakened to about ￥155.20 to the US dollar after the data were released, from about 154.98 just before.

  The BOJ has flagged expectations that price growth would slow partly due to more government steps, including utility subsidies as well as comparisons with price spikes a year earlier. Authorities have said they remain focused on underlying inflation rather than such one-off factors.

  For that reason, the data are not likely to shake the central bank’s resolve to continue normalizing policy settings with rate hikes when conditions allow.

  Many economists think the next move could come as soon as April, with an outside risk of an adjustment when authorities next set policy on March 19.

  “I don’t think today’s data will change BOJ’s stance on raising rates,” Saito said. “But this points out the need of careful communications as they are going to be raising rates when inflation data suggest a slowdown.”

  “Cooling inflation — and tacit pressure from pro-stimulus Premier Sanae Takaichi after her landslide snap-election win — argues against haste at the BOJ. We expect higher labor costs to keep feeding through to prices and nudge the central bank to raise its policy rate in July,” Bloomberg economist Taro Kimura said.

  Service prices, a vital component of the index that indicates the sustainability of inflation, increased 1.4 percent from a year earlier, the same pace as the previous month.
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