Core consumer prices in Tokyo’s central wards rose 1.8% year-on-year in August 2026, up from a downwardly revised 1.7% increase in July and above market expectations of 1.7%. This was the third consecutive month of faster price growth and the steepest rise since March, indicating broadening inflationary pressures linked to the conflict in the Middle East. Even so, inflation remained below the Bank of Japan’s 2% target for the seventh straight month, as fuel subsidies and favorable base effects helped cushion the impact of higher raw material costs associated with the conflict.
Meanwhile, the CPI measure that excludes volatile fresh food and energy prices—regarded by the BoJ as a more reliable indicator of underlying inflation—climbed 2.0% year-on-year, up from a downwardly revised 1.8% in July and the highest reading in five months. At its July meeting, the BoJ left its policy rate unchanged after raising it by 25 basis points in June to the highest level since September 1995, aiming to prevent rising oil prices from further stoking inflation.
