Japan’s National CPI Rises 3.5% YoY in May; Core Inflation Beats Expectations

Japan’s May CPI Confirms Persistent Inflation Pressures

Key Highlights:

• National CPI rose 3.5% YoY in May, slightly down from April’s 3.6%.
• Core CPI (ex Fresh Food) jumped to 3.7%, surpassing market forecasts of 3.6%.
• CPI excluding Fresh Food and Energy increased to 3.3%, up from 3.0% previously.
• The BoJ may face added pressure to adjust policy if inflation remains above target.

Core Inflation Surprises to the Upside

According to data released by the Japan Statistics Bureau, Japan’s headline inflation cooled slightly, but core and underlying measures surged, suggesting stronger-than-anticipated price pressures in the economy.

The CPI excluding Fresh Food — Japan’s key measure used by the Bank of Japan (BoJ) — rose to 3.7% YoY, topping the forecast of 3.6% and marking a second consecutive monthly acceleration.

CPI Details: Broader Inflation Trends

Inflation MeasureMay 2025 (YoY)Previous (YoY)Market ForecastNational CPI3.5%3.6%3.5%CPI ex Fresh Food (Core CPI)3.7%3.5%3.6%CPI ex Fresh Food & Energy3.3%3.0%-

The CPI ex Fresh Food & Energy, often used to assess underlying inflation, rose to 3.3%, showing that even beyond volatile categories, price growth is firm.

What It Means for BoJ Policy

Persistent inflation above the BoJ’s 2% target could put pressure on policymakers to adjust ultra-loose monetary policy. While the BoJ has maintained its dovish stance, stronger inflation could prompt reevaluation, especially if core prices remain elevated.

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