Japan inflation falls below BOJ’s 2% target for first time since March 2022

Japan’s headline inflation rate fell to 1.5% in January, its lowest level since March 2022.

The reading ended a run of 45 straight months in which inflation had remained above the Bank of Japan’s 2% target.

Core inflation rate, which excludes fresh food prices, eased to 2%, the lowest level since January 2024 and matching the 2% forecast by economists polled by Reuters. It was down from 2.4% in December.

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.

Rice inflation slowed for an eighth straight month to 27.9%.

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.

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