Japan Kerninflation

Japan's core consumer price index (CPI), which excludes fresh food but includes fuel costs, rose by 3.2% year-on-year in January 2025. This marks an acceleration from the 3% increase in December and outpaces market expectations, which anticipated a modest uptick to 3.1%. The January figure also represents the highest level since June 2023, further solidifying a hawkish outlook for the Bank of Japan's monetary policy. Core inflation in Japan has remained consistently at or above the Bank of Japan's 2% target for nearly three years. In response to strong wage growth and ongoing inflationary pressures, the BOJ raised its policy rate by 25 basis points to 0.5% in January—the highest level in 17 years. While the central bank is expected to implement further rate hikes this year, the timing of a potential move in March remains uncertain.