Japan core inflation in February misses estimates, headline CPI eases for a fourth straight month

Japan’s headline inflation rate eased for a fourth straight month in February as the economy cooled on stabilizing food prices, though soaring energy prices risk pushing up living costs.

The consumer price index fell to 1.3% last month, according to data released Tuesday, its lowest level since March 2022 and below the central bank’s 2% target. It was down from 1.5% in January.

Core inflation rate, which strips out fresh food prices, moderated to 1.6% in February, missing economists’ forecast for 1.7% rise and compared with 2% rise in January.

The so-called “core-core” inflation, excluding prices of fresh food and energy, came in at 2.5%, compared with 2.6% in January.

The Bank of Japan has pegged its forecast for core inflation and “core-core” for fiscal 2026, which begins April 1, at 1.9% and 2.2%, respectively.

The central bank has projected that year-on-year increase in consumer prices may fall below 2% in the first half of this year, due to government efforts to ease living costs and stabilize food prices.

Prime Minister Sanae Takaichi had pledged to suspend an 8% food tax for two years during the election campaign.

Last week, the BOJ held its interest rate steady at 0.75% as expected while cautioning upside risks to inflation stemming from the conflict in the Middle East, which has sent energy prices soaring.

Japan’s economy expanded just 0.1% year-on-year in the fourth quarter last year, narrowly avoiding a technical recession and slowing from 0.6% growth in the third quarter.

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