Japan has released its CPI data, and it came in below expectations!

📊 Expectation: 2.70%
📉 Actual: 2.00%

Japan's national Consumer Price Index (CPI) data for November 2025 was initially projected at 2.9% headline and 3.0% core. However, the Tokyo CPI data released on December 26, 2025 (approximately today), a leading indicator of the national trend, showed a significant slowdown in December. The headline CPI fell from 2.7% to 2.0%, while the core CPI (excluding fresh food) dropped from 2.8% to 2.3%. The expectation for core was 2.5%, meaning it was below the actual expectation (2.3% vs 2.5%). This slowdown stems from moderate increases in food and energy costs. This development sends mixed signals for the Bank of Japan (BOJ). The BOJ raised interest rates to 0.75% in mid-December, reaching a 30-year high, and is monitoring inflation to sustainably maintain its 2% target. Tokyo data shows inflation slowing, but remaining above 2% keeps alive the possibility of the BOJ continuing with gradual interest rate hikes. Governor Kazuo Ueda stated that underlying inflation is approaching the target, while the weakness of the yen is creating risk by increasing import costs. Market reaction: After the data release, the yen weakened against the dollar (approaching 156 levels), while the Nikkei rose slightly. Analysts increased the likelihood of a delayed interest rate hike at the January 2026 BOJ meeting, but believe that normalization will continue in the long term. The national December CPI will be released on January 23, 2026, and will confirm the Tokyo trend. Overall, this cooling in inflation is positive for markets in the short term (lower interest rate pressure), but the BOJ's efforts to maintain its 2% target create long-term uncertainty. The Japanese economy continues to be supported by wage increases and global demand.
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