Japan opened 2026 with a clear shift in price momentum.
Annual consumer inflation slowed to 1.5% in January, down from 2.1% in December, marking the lowest reading since March 2022. The data signals that the intense price pressures of recent years are gradually easing.
Food inflation, once a primary driver of rising prices, moderated notably. Annual food price growth eased to 3.9% from 5.1%, the slowest pace in over a year. Rice prices, in particular, recorded their mildest increase in 18 months. Given the weight of food in household spending, this deceleration has had a meaningful impact on overall inflation dynamics.
Energy costs continued to move lower. Electricity prices declined 1.7%, while gas fell 2.0%, extending a second consecutive monthly drop. Government support measures played a decisive role in cushioning households from external energy fluctuations and anchoring headline inflation.
Price growth slowed across transport, healthcare, and household goods. However, clothing and communication costs accelerated, while housing remained steady. Education expenses continued to fall, adding further downward pressure to the overall index.
Core inflation, which excludes fresh food and is the Bank of Japan’s preferred measure, eased to 2.0%, aligning directly with the central bank’s long-term goal. On a monthly basis, consumer prices fell 0.2%, marking a second straight decline. The figures suggest Japan is transitioning into a more stable inflation phase, easing immediate policy pressure and supporting a steadier economic backdrop as 2026 unfolds.
Markets traded cautiously ahead of key inflation data and amid ongoing trade and geopolitical uncertainty.
Markets remained cautious as a new 10% U.S. global tariff weighed on risk sentiment. The euro and pound stayed under pressure near recent lows, while the yen rebounded on renewed speculation around Bank of Japan tightening.
Global markets remained cautious as a new 10% U.S. global tariff came into force, keeping trade uncertainty at the center of investor focus.
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