Tokyo's core consumer price index rose 1.8% in February, falling below the Bank of Japan's 2% target for the first time since October 2024. Prime Minister Sanae Takaichi's utility subsidies curbed household energy costs, posing a communication challenge for the central bank's planned interest rate hikes. The figure exceeded economists' median forecast of 1.7%.
Tokyo's core consumer price index, which excludes fresh food, rose 1.8% in the year to February 2026, down from 2.0% in January and marking the slowest pace in more than a year. The figure, released by the internal affairs ministry on Friday, fell below the Bank of Japan's 2% target for the first time since October 2024, though it slightly beat the median economist forecast of 1.7%. As a leading indicator for nationwide price trends, the data highlights the impact of government measures to lower utility bills, which were expected to weaken inflation for a third consecutive month.
Prime Minister Sanae Takaichi's utility subsidies have curbed household energy costs, while the fading effects of last year's food price spikes contributed to the slowdown. A broader measure excluding both fresh food and energy, seen as a better gauge of underlying inflation, rose 2.5% in February, up from 2.4% in January and remaining above the BOJ's target.
The slowdown aligns with the BOJ's projections of a temporary dip due to fuel subsidies and base effects from prior surges, with expectations of reacceleration driven by steady wage gains. In December 2025, the central bank raised interest rates to a 30-year high of 0.75%, signaling progress toward sustainably achieving 2% inflation after decades of massive monetary support. It has indicated readiness for further hikes if economic and price forecasts hold.
While the data offers some relief to consumers, it complicates the BOJ's messaging on justifying additional rate increases. The Tokyo CPI remains a key watchpoint for the bank's policy path.
