Japan's inflation rate eases below central bank's target for the first time since 2022

Japan’s main inflation indicator is expected to decelerate more than anticipated to its lowest rate in over four years. This comes to pass as utility subsidies reduce energy costs. The current spike in oil prices is expected to fuel a recovery in the upcoming months.

The Ministry of Internal Affairs and Communications said on Tuesday that consumer prices, excluding fresh food, increased 1.6% from a year ago in February, the least increase since March 2022. After the gauge increased by 2% the month before, it was less than the median economist’s prediction of 1.7%.

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The Bank of Japan’s 2% target was well exceeded by the 2.5% increase in the measure, which also removes energy to represent underlying inflation strength. All-item overall inflation fell to 1.3%, the lowest rate since March 2022.

While price increases for food, excluding fresh goods, slowed to 5.7% in February from 6.2% in January, the decrease in energy costs surged to 9.1%, with electricity prices leading the dip. A crucial indicator of underlying inflation, service costs increased by 1.4% over the previous year. After a record 101.7% gain in May 2025, rice prices, which were the main driver of last year’s growth, jumped 17.1%.

Consumers are already dealing with skyrocketing petrol prices, which might prolong a cost-of-living squeeze of more than four years, despite a slowdown in inflation. Japan’s economy is among the most susceptible to increased tensions in the Middle East due to its significant reliance on imported energy.