Analysis: Tokyo's inflation cooling exceeds expectations, but it is unlikely to prevent the Bank of Japan from continuing to raise interest rates

According to Jinshi Data, Tokyo's inflation has cooled more than expected, as the pressure from food and energy prices eases, but this is unlikely to prevent the Bank of Japan from continuing to raise interest rates. Data released by the Ministry of Internal Affairs and Communications on Friday showed that the consumer price index (CPI) in Tokyo, excluding fresh food, rose 2.3% year-on-year in December, a significant slowdown from 2.8% in the previous month.

This is the first instance of inflation slowing since August, mainly reflecting a deceleration in food price increases and a decline in energy costs. Economists had previously expected this indicator to slow to 2.5%. The overall inflation indicator fell from 2.7% in the same period last year to 2.0%; while the deeper inflation indicator, excluding energy prices, also slowed to 2.6%. Tokyo's inflation data is often seen as a leading indicator of national inflation trends.

Despite the significant slowdown in overall inflation data, it remains above the Bank of Japan's 2% target, keeping the central bank on track for further tightening of policies.