Japan: Inflation remains above the Central Bank’s target in April
Latest reading: Inflation was stable at March’s 3.6% in April. April’s figure represented the joint-lowest inflation rate since November 2024.
However, core inflation rose to 3.6% in April from March’s 3.1%, the highest figure in more than two years, among the strongest in the G7 and exceeding the Bank of Japan’s (BOJ) 2.0% target for the 15th consecutive month. Rice prices surged nearly 100% on recent poor harvests and rising tourist demand, while energy costs jumped as the government pared back subsidies for gas and electricity.
Annual average inflation ticked up to 3.1% in April (March: 3.0%).
Finally, consumer prices increased 0.36% in April over the previous month, accelerating from March’s 0.26% increase.
Outlook: Our panelists expect inflation to trend down later this year, averaging at the BOJ’s target in Q4. In 2026 and thereafter, inflation is seen stabilizing a tad below target. This is because the factors that have pushed up price pressures in recent years—notably a weak yen and low interest rates—are seen receding ahead. A key risk is U.S. tariffs due to their impact on trade flows, commodity prices and economic activity at home and abroad.
Panelist insight: Nomura’s Kyohei Morita and Uichiro Nozaki commented:
“The April all-Japan CPI data suggest that wages are continuing to feed through to prices, which could be seen as justifying a BOJ rate hike. However, the BOJ looks unlikely to hike rates in 2025, when tariffs are likely to continue to adversely affect the economy. Nomura still forecasts a rate hike in January 2026.”