Japan’s inflation slowed further in February, with core CPI (ex-fresh food) easing from 2.0% yoy to 1.6% yoy, below expectations of 1.7% yoy. The drop pushed core inflation below the Bank of Japan’s 2% target for the first time in nearly four years, largely reflecting government measures to curb electricity costs.
The decline was driven primarily by falling energy prices. Energy costs dropped -9.1% yoy after -5.2% yoy in January, with gasoline prices plunging -14.9% yoy and electricity bills falling -8.0% yoy. This sharp easing in energy inflation offset still-elevated food prices, where costs excluding fresh items rose 5.7% yoy, albeit moderating from 6.2% yoy previously.
Broader inflation indicators also softened. Core-core CPI (ex-fresh food and energy) edged down from 2.6% yoy to 2.5% yoy. Headline CPI fell from 1.5% yoy to 1.3% yoy, marking the lowest level since March 2022 and a fourth consecutive monthly slowdown.
