Thursday, January 15, 2026, an employee at the Celsior Wadamachi supermarket in Yokohama. Rising food prices are a key factor driving a broader rise in inflation, with data on Friday expected to show consumer price growth has exceeded the central bank’s 2% target for the fourth straight calendar year.
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Japan’s headline inflation rate sharply slowed to 2.1% from 2.9% in November, the lowest level since March 2022. This is because the political focus on easing price pressures and the cost of living collide with impending central bank decisions.
This is the 45th consecutive month that the inflation rate has exceeded the Bank of Japan’s 2% target.
Core inflation, which excludes fresh food prices, was 2.4%, in line with analysts’ expectations and the lowest level since October 2024. This was significantly lower than the 3% in November.
So-called “core-core” inflation, which excludes fresh food and energy prices, fell to 2.9% from 3% the previous month.
Japan’s full-year inflation rate was 3.2%, according to government data. Inflation reached its highest level in two years in January 2025, then slowed throughout the year.
However, rice inflation in Japan reached its highest level in more than 50 years in May, and rice prices soared to their highest level at the time.
The US inflation rate in December was 34.4%, the seventh consecutive month of decline compared to the previous year.
Despite this, rice prices in Japan remain near record levels. According to data from Japan’s Ministry of Agriculture, Forestry and Forestry, the average price for a 5kg bag of rice for the week ending January 11 was 4,267 yen.
Back in 2025, soaring rice prices and careless comments cost then-Minister of Agriculture, Forestry and Fisheries Taku Eto his job, and former Prime Minister Shigeru Ishiba was reportedly asked to take personal responsibility for lowering prices as rice shortages worsened.
“Higher prices in Japan remain the main driver of inflation,” Marcel Tilliant, head of Asia Pacific at Capital Economics, told CNBC’s “Squawk Box Asia” on Friday.
He pointed out that import prices slowed in 2025 due to the appreciation of the yen, but the decline stopped after that.
“Therefore, goods inflation is likely to remain high for an extended period of time, which would likely result in inflation remaining above the BOJ’s target for an extended period of time.”
This could lead to rate hikes as early as April, Tilianto said.
snap election
The data was released after Prime Minister Sanae Takaichi dissolved the House of Representatives on Friday ahead of a snap general election scheduled for February 8.
Takaichi has made tackling the cost of living a top priority, vowing to suspend Japan’s 8% food tax for two years to help households struggling with soaring living costs.
Last year, her government put together a massive $135 billion stimulus package that included expanding subsidies to local governments and providing subsidies for electricity and gas bills.
Separately, the Bank of Japan slightly raised its fiscal 2026 inflation forecast from 1.8% to 1.9% and kept the policy interest rate unchanged at 0.75%.
— CNBC’s Martin Soong, Chery Kang and Kaori Enjoji contributed to this report.
