FX.co ★ Japan’s Core Inflation Exceeds Expectations

In February 2025, Japan's core consumer price index, which excludes fresh food but accounts for fuel costs, experienced a year-on-year increase of 3%. Although this was a slight deceleration from the 3.2% rise recorded in January, it still exceeded market predictions of a 2.9% rise. For the second month in a row, core inflation has surpassed forecasts, underscoring ongoing inflationary pressures. For nearly three years, Japan's core inflation has consistently met or exceeded the Bank of Japan's 2% target. Consequently, driven by robust wage growth and persistent price pressures, the BOJ raised its policy rate by 25 basis points in January to 0.5%, marking the highest rate in 17 years. Nonetheless, in March, the central bank decided to maintain steady interest rates as it evaluated global economic risks, particularly the consequences of heightened U.S. tariffs on Japan's economy.