Tokyo Inflation Surges as Subsidy Programmes Expire

Tokyo's inflation rate has surged to 2.7% in September, marking the highest increase since December 2025, as government subsidies on energy costs expired.

The expiration of these subsidies led to a sharp rise in electricity and gas tariffs, with prices increasing by approximately 8% month-on-month in Tokyo.

This development is significant for the Bank of Japan, which has maintained an ultra-loose monetary policy stance despite inflation running above its 2% target.

The September data complicates this narrative, as it suggests that inflation may remain elevated without fiscal cushions through year-end.

The government's decision to phase out subsidies was based on the assumption that global commodity prices have stabilized, but the timing of this move coincides with a period of sustained currency weakness, which has raised import costs for energy and other goods.