Japan’s key inflation indicators cooled considerably in December, with the headline rate slipping to 2.1%—the lowest since March 2022. The pullback in price growth comes as policymakers weigh living cost issues and the Bank of Japan (BOJ) interest rate decision on Friday.
The headline consumer price index (CPI) slid from 2.9% in November to 2.1% in December. Meanwhile, the core CPI—which removes fresh food prices—climbed 2.4% year-on-year, aligning with market expectations and significantly down from the previous month’s 3.0%.
A separate indicator that strips out both fresh food and fuel, considered by the BOJ as a more accurate signal of underlying inflation, showed a 2.9% increase. This was a slight retreat from November’s 3.0% figure.
Annual inflation for 2025 was recorded at 3.2%. The pace of price growth reached a peak not seen in two years in January 2025, then steadily decreased throughout the year.
Rice inflation was reported at 34.4% in December, continuing a seven-month trend of lower year-on-year gains. Despite the slowing rate, rice prices remain near historic highs; figures from the agriculture ministry indicated a 5-kilogram bag averaged JPY 4,267 in the week to January 11.
The BOJ opted to leave its key interest rate unchanged at 0.75% on Friday, while updating its projections to reflect higher growth and inflation.
