Core consumer prices in Tokyo’s central wards rose 2.7% year-on-year in September 2026, up from a 1.8% increase in August and above market expectations of 2.4%. This marked the fourth consecutive month of acceleration and the fastest pace since November 2025, indicating broadening price pressures linked to the conflict in the Middle East.
Inflation climbed above the Bank of Japan’s 2% target for the first time in nine months, driven primarily by higher oil prices associated with the Middle East conflict, even as the government increased subsidies on regular gasoline. Meanwhile, the core CPI measure that excludes both volatile fresh food and energy prices—regarded by the BoJ as a more accurate gauge of underlying inflation—rose 3.0% year-on-year, up from 2.0% in August, the highest level in 13 months.
In response to the persistence of inflation amid elevated oil prices and ongoing geopolitical tensions in the Middle East, the BoJ raised its policy rate by 25 basis points to 1.25% at its September meeting, the highest level since April 1995.
