Shop owners of a 70-year-old "takoyaki", or octopus balls, restaurant chat while cooking along a street in the Taito Ward area of Tokyo on February 21, 2025.
Richard A. Brooks | Afp | Getty Images
Japan's headline inflation rate plunged to 1.5% in January, marking its lowest level since March 2022.
It also ended a run of 45 straight months during which the inflation rate has been above the Bank of Japan's 2% target.
The country's core inflation rate eased to 2%, marking the lowest level since January 2024 and matching the 2% forecast by economists polled by Reuters, down from December's 2.4%.
The so-called "core-core" inflation — excluding prices of fresh food and energy — came in at 2.6%, compared with 2.9% in December.
In January, the Bank of Japan upgraded its inflation forecasts for fiscal 2026, which begins April 1. It projected core inflation at 1.9% and "core-core" inflation at 2.2%, up from 1.8% and 2%, respectively, in its October 2025 outlook.
The BOJ also wrote in its outlook that the year-over-year rise in consumer prices is likely to fall below 2% in the first half of 2026, as food prices stabilize and government efforts to ease living costs.
Among those measures is an election pledge by Prime Minister Sanae Takaichi to suspend an 8% food tax for two years.
Takaichi swept to a landslide victory in the Feb. 8 Lower House election, with the ruling Liberal Democratic Party winning 316 seats, the strongest showing by a single party since the end of World War II.
The inflation reading comes after Japan's economy grew 0.1% in the fourth quarter on Monday, narrowly avoiding a technical recession.
— This is breaking news, please check back for updates.
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