Japan’s Core Inflation Hits 2.1 Percent, the Fastest of 2026, as Services Rise 1.5 Percent
Japan’s consumer prices excluding fresh food rose 2.1 percent in September from a year earlier, up from 1.7 percent in August, the Statistics Bureau of the Ministry of Internal Affairs and Communications reported on 23 October. That is the fastest pace of 2026, on our count. The headline index, at 102.2 on the new 2025 base, also rose 2.1 percent. The measure that strips out both fresh food and energy climbed to 2.4 percent from 1.9 percent.
The data land ahead of the Bank of Japan’s policy meeting on 29 and 30 October, the first since the Bank lifted its target for the overnight call rate to around 1.25 percent in September.
The fastest core reading of the year
The core rate, which excludes fresh food, spent the spring at its low point. It ran at 1.4 percent in April and May, then edged up to 1.6 percent in June and 1.8 percent in July before slipping to 1.7 percent in August. September’s 0.4 point rise was the largest monthly increase in the rate this year, on our count, and took it to its highest since December 2025, when it stood at 2.4 percent.
The measure excluding fresh food and energy moved further. It jumped 0.5 points, on our calculation. That took it level with February and March, at the highest since January’s 2.5 percent, on our count. It now sits 0.3 points above the headline rate, on our calculation. On our reading, energy explains that gap: energy prices fell on the year, while fresh food, at 2.1 percent, rose in line with the headline.
Japan CPI, year on year, September 2025 and January to September 2026
| Month | Headline | Excluding fresh food | Excluding fresh food and energy |
|---|---|---|---|
| Sep 2025 | 2.9% | 2.9% | 3.0% |
| Jan | 1.5% | 1.9% | 2.5% |
| Feb | 1.3% | 1.5% | 2.4% |
| Mar | 1.5% | 1.7% | 2.4% |
| Apr | 1.4% | 1.4% | 1.9% |
| May | 1.5% | 1.4% | 1.8% |
| Jun | 1.6% | 1.6% | 1.7% |
| Jul | 1.9% | 1.8% | 1.9% |
| Aug | 1.9% | 1.7% | 1.9% |
| Sep | 2.1% | 2.1% | 2.4% |
2025-base CPI, original series. Year-on-year rates are the published figures for each base year.
The month-on-month figures point the same way. After seasonal adjustment, core prices rose 0.5 percent from August. The headline index rose 0.4 percent. Prices excluding fresh food and energy also rose 0.5 percent, the largest adjusted monthly gain in the 13 months the Bureau shows, on our count. Over July to September, that measure rose at an annualised pace of 4.5 percent, on our calculation from its three adjusted monthly gains. Because the index is set at 100 for the 2025 average, its September level of 102.8 means prices on that measure sit 2.8 percent above last year’s average, on our calculation.
Fresh food eases, services and durables add
Fresh food explains why the headline rate rose less than the core. Fresh food inflation dropped to 2.1 percent from 6.0 percent, and its prices fell 3.8 percent in the month on an unadjusted basis. Its contribution to the headline rate shrank to 0.08 points from 0.23, a loss of 0.15 points. Fresh fish, part of fresh food, rose 13.9 percent.
Food excluding fresh food kept climbing, at 2.9 percent after 2.7 percent in August. Its weight of 2,375 in 10,000 gives it 23.75 percent of the basket, on our calculation. It supplied 0.69 points of the headline rate, or 33 percent, on our calculation. Prepared foods rose 4.2 percent and beverages 6.0 percent. Confectionery and meat rose 4.3 percent each. Rice moved against the trend. Ordinary rice other than Koshihikari fell 21.1 percent, and cereals as a group fell 5.0 percent.
Contributions to September’s 2.1 percent, selected categories
| Category | Year on year | Contribution, points | Change from August, points |
|---|---|---|---|
| Food excluding fresh food | 2.9% | 0.69 | +0.04 |
| Culture and recreation | 3.9% | 0.36 | +0.16 |
| Transport and communications | 2.5% | 0.36 | +0.02 |
| Housing | 1.1% | 0.25 | +0.03 |
| Furniture and household goods | 6.5% | 0.24 | +0.06 |
| Fresh food | 2.1% | 0.08 | -0.15 |
| Energy | -0.6% | -0.04 | +0.01 |
| Education | -3.8% | -0.12 | 0.00 |
Selected categories, ranked by contribution. Contributions are percentage points of the headline year-on-year rate. Energy items also sit inside the fuel, light and water and the transport groups, so the rows overlap and do not add up to the total.
Services added more to the acceleration than goods, on the Bureau’s contribution figures. Services inflation rose to 1.5 percent from 1.2 percent. Their contribution grew by 0.19 points, against 0.07 for goods. Excluding the imputed rent of owner-occupied homes, services rose 2.0 percent. Hotel charges swung to a 4.6 percent rise from a 1.4 percent fall, adding 0.07 points. Culture and recreation showed the biggest change in contribution among the 10 main categories, plus 0.16 points, on our count.
Goods inflation rose to 2.8 percent from 2.6 percent. The gap between goods and services narrowed to 1.3 points from 1.4, on our calculation. Household durables rose 6.2 percent and recreational durables 7.4 percent, both faster than in August. Household consumables rose 12.4 percent. Toilet paper rose 17.8 percent and mobile phones 10.9 percent. Water charges swung to a 4.9 percent rise from a 3.5 percent fall, adding 0.07 points to the headline’s rise. Education went the other way. Private high school tuition fell 73.2 percent, and the education group fell 3.8 percent.
Goods and services, year on year
| Measure | September | August | Contribution, September |
|---|---|---|---|
| Goods | 2.8% | 2.6% | 1.39 |
| Goods excluding fresh food | 2.8% | 2.4% | 1.31 |
| Industrial products | 3.9% | 3.4% | 1.42 |
| Services | 1.5% | 1.2% | 0.76 |
| Services excluding imputed rent | 2.0% | 1.5% | 0.67 |
| Public charges | 0.5% | -0.3% | 0.08 |
Goods and services classification. Contributions are percentage points of the headline rate.
Energy measures hold the headline down
Energy prices fell 0.6 percent on the year, after 0.7 percent in August. They make up 7.49 percent of the basket, on our calculation. Electricity, which accounts for 50.2 percent of the energy weight on our calculation, fell 2.4 percent, and gasoline fell 2.6 percent. Kerosene rose 15.3 percent and propane 6.3 percent.
The Bureau’s trial estimate puts the effect of abolishing the provisional gasoline tax rate and of other policy measures at minus 0.82 points on the headline rate. Gasoline accounts for 0.48 points of that, or 58.5 percent on our calculation, and electricity for 0.24 points. This month’s measures took off 1.26 points, and last year’s measures dropping out of the comparison gave back 0.44. Energy’s actual contribution was minus 0.04 points. Taking out the measures’ estimated effect turns that into plus 0.78 points, on our calculation. This is a mechanical calculation from the Bureau’s trial estimate, not a forecast of what prices would have done.
What it means for the Bank of Japan
The Bank raised its target for the overnight call rate to around 1.25 percent on 18 September, effective from 24 September, on a 7 to 2 vote. It had set the rate at around 1.0 percent on 16 June and kept it there on 31 July. Its September statement said “underlying CPI inflation has been approaching 2 percent”. As a simple ex-post proxy, the policy rate less September’s core inflation gives a real rate of minus 0.85 percent, on our calculation. On the same proxy, using the measure excluding fresh food and energy, it is minus 1.15 percent, on our calculation.
In its July Outlook Report, the Bank of Japan put the median board forecast for core inflation in fiscal 2026 at 2.5 percent, down from 2.8 percent in April. It said the cut was due partly to government measures that reduce households’ energy bills. The report also expects the core rate to rise to a level clearly above 2 percent from the second half of the fiscal year. From April to September the simple average of the monthly core rates was 1.7 percent, on our calculation. That is not an official half-year measure, and it compares with the 2.5 percent median for the whole fiscal year.
Board forecasts for Japan’s inflation, median, July 2026
| Fiscal year | Core CPI | Core CPI in April forecasts | CPI excluding fresh food and energy |
|---|---|---|---|
| 2026 | 2.5% | 2.8% | 2.5% |
| 2027 | 2.4% | 2.3% | 2.6% |
| 2028 | 2.0% | 2.0% | 2.2% |
Outlook for Economic Activity and Prices, July 2026. The majority range for fiscal 2026 core CPI is 2.3 to 2.7 percent. Core CPI excludes fresh food.
Why it matters: Services led September’s rise, helped by hotel charges. Durable goods added to it. Food excluding fresh food also pushed prices up, while fresh food slowed. On our reading, services prices are the ones that show whether wages and prices are rising together. The measure excluding fresh food and energy is back above 2 percent, at 2.4 percent, and the simple real-rate proxy is still below zero. On our reading, that fits the Bank’s view that underlying inflation is approaching 2 percent. On the Bureau’s trial estimate, government energy measures took 0.82 points off the headline rate.
Outlook: The Bank meets on 29 and 30 October. Its next Outlook Report follows, with the Bank’s View on 30 October and the full text on the next business day. That report is the next test of how much acceleration the Bank still expects in the second half of the fiscal year. In the first half, the monthly core rates averaged 1.7 percent, a simple average on our calculation.
Sources: Statistics Bureau of Japan, Bank of Japan, The Edge.
