Japan’s core consumer price index (CPI), which excludes fresh food but includes energy, rose 1.4% year-on-year in May 2026, matching both April’s reading and market expectations. However, this was the lowest rate of increase since March 2022 and remained below the Bank of Japan’s 2% target for the fourth consecutive month. Government fuel subsidies continued to temper upward pressure on prices stemming from higher oil costs associated with the Iran-Israel conflict.
Meanwhile, the CPI measure that strips out both fresh food and fuel—a gauge closely monitored by the Bank of Japan as a better indicator of demand-driven inflation—climbed 1.8% year-on-year in May, its weakest gain since September 2022.
At its June meeting, the Bank of Japan raised its benchmark interest rate by 25 basis points to the highest level since September 1995, marking its first rate hike since December. The move was aimed at preventing higher oil prices from feeding more persistently into overall inflation.
