In April, Japan's core inflation eased to 1.4%, falling short of the 1.7% forecast by economists and down from 1.8% in March. This marks the fourth consecutive month that inflation has remained below the Bank of Japan's 2% target. The headline inflation also decreased to 1.4% from 1.5% in March. The core-core inflation rate, which excludes food and energy prices, dropped to 1.9% from 2.4%.
The decline in energy prices, which fell 3.9% in April compared to a 5.7% drop in March, is attributed to the ongoing conflict in the Middle East. Following the inflation data release, Japan's Nikkei 225 index rose by 0.96%, while the yen slightly weakened to 159.03 against the dollar.
The Bank of Japan had recently revised its core inflation forecast upward to 2.8% from 1.9%, citing rising crude oil prices and increased costs passed on to consumers.
Additionally, Prime Minister Sanae Takaichi indicated a willingness to consider a supplementary budget to mitigate rising energy costs, with opposition lawmakers proposing a package worth 3 trillion yen ($18.8 billion) to extend petrol subsidies and provide relief for electricity bills.
Japan's economy showed resilience with a 2.1% annualized growth in the first quarter of 2026, driven by strong exports, which may still prompt the Bank of Japan to consider a rate hike despite the current inflation data