Japan’s inflation problem used to be that prices wouldn’t rise fast enough. That problem is back.
Tokyo’s core consumer price index climbed just 1.3% year-on-year in May 2026, falling short of both the market consensus of 1.5% and the Bank of Japan’s 2% inflation target. It’s the fourth straight month that core inflation has landed below the BOJ’s threshold, and the sixth consecutive month of deceleration overall.
The numbers tell a deflationary story
May’s 1.3% reading represents a noticeable drop from April’s 1.5%. On a national level, April’s core CPI came in at 1.4% year-on-year, the lowest reading since March 2022.
The BOJ’s preferred “core-core” measure, which strips out both food and energy, registered 1.9% in April. Government subsidies targeting fuel costs and education expenses are mechanically suppressing the headline numbers. Softer food prices have also contributed to the cooling trend, even as raw material costs remain elevated due to geopolitical tensions.
