Japan CPI Steady as BOJ Prepares for Second Rate Hike in 2026

Japan's Consumer Price Index (CPI) remained steady in August, while core inflation unexpectedly fell and pulled back from near the Bank of Japan's annual target. The data released on Friday came just hours before the conclusion of a BOJ meeting, where the central bank is widely expected to raise interest rates by 25 basis points.

The core CPI reading, which excludes volatile fresh food prices, grew 1.7% year-on-year in August, slightly below expectations that it would remain steady at 1.8%. A core CPI reading that excludes both fresh food and energy prices remained steady at 1.9% in August.

Japanese inflation has steadily crept higher this year as businesses passed on higher input costs to consumers. Despite government subsidies on fuel keeping consumer inflation relatively subdued, producer price index inflation recently soared to an over three-year high and is expected to spill over into CPI inflation in the coming months.