Japan’s price pressures keep BOJ tightening in view

Amid rising inflation, the Bank of Japan didn’t raise rates last month – but it left the door open to doing so.

Our chart supports the BOJ’s stance. Most of the central bank’s preferred measures of underlying inflation re-accelerated above 2% in the second half of 2026. CEIC’s own higher-frequency core inflation nowcast also points to renewed price pressure.

Together, the indicators suggest that the recent pickup is broader than movements in volatile food and energy components. Evidence suggests that Japanese consumers continue to substitute relatively cheaper products in this environment – but this negative substitution effect has not been sufficient to offset stronger price increases.