Japan Core Inflation Slows to 1.4%, Undershooting Forecasts
Japan's core CPI rose 1.4% year-on-year in April, missing the 1.7% forecast and marking the slowest pace since March 2022, reducing pressure on the Bank of Japan to raise rates.
Japan's core inflation rate slowed more than expected in April, with the core CPI (excluding fresh food) rising just 1.4% year-on-year, compared to the 1.7% forecast and down from 1.8% in March. This is the slowest pace of core inflation since March 2022. The broader headline CPI also missed expectations at 1.4% versus 1.6% expected, while the core-core CPI (excluding fresh food and energy) came in at 1.9%, below the 2.2% forecast and the slowest since July 2024.
The softer-than-expected inflation data reduces the urgency for the Bank of Japan to raise interest rates further. Markets had been pricing in a potential rate hike later this year as the BoJ gradually normalizes policy, but the latest figures suggest that underlying price pressures remain subdued. For traders, this means the yen could face continued weakness as the interest rate differential with other major economies, particularly the US, remains wide. Traders can track the yen's reaction and other rate-sensitive instruments on NowPrice's live rates dashboard.
Looking ahead, focus will shift to upcoming data releases such as the Tokyo CPI for May and the national CPI for May, which will provide further clues on the inflation trajectory. The BoJ's next policy meeting is also closely watched, with markets now expecting a more cautious approach. Any further downside surprises in inflation could push back expectations for a rate hike into 2027.