The Consumer Price Index for February 2026 showed the headline index up 1.3% year‑on‑year (down 0.2 percentage points from 1.5% in the prior month). Core CPI (excluding fresh food) fell to 1.6% (down 0.4 percentage points from 2.0% the prior month). Core‑core CPI (excluding fresh food and energy) slowed to 2.5% (down 0.1 percentage points from 2.6% the prior month). All three measures therefore decelerated in February. The BOJ (Bank of Japan) trimmed mean stood at 2.2%, down 0.1 percentage points from 2.3% the prior month, marking a low since August 2025. The corporate goods price index (CGPI) was 128.3, down 0.1 point from the prior month, indicating stabilization in upstream prices and a moderation of pass‑through pressure to consumer prices. Overall, this is evaluated as a clear weakening of underlying inflationary pressure.
According to the Statistics Bureau of Japan (MIC), the CPI headline for February 2026 was 112.2 (2020=100), down 0.7 points from 112.9 in the prior month, and rose 1.3% year‑on‑year. Although the month‑on‑month decline includes seasonal factors, the shrinkage of the year‑on‑year increase from 1.5% to 1.3% indicates waning price pressures. Core CPI (excluding fresh food) rose 1.6% year‑on‑year, down 0.4 percentage points from 2.0% the prior month, reaching its lowest level since February 2025. Core‑core CPI (excluding fresh food and energy) slowed to 2.5%, down 0.1 percentage points from 2.6% the prior month, but remains 0.5 percentage points above the BOJ’s price stability target of 2%.
Analyzing the divergence among the three measures, the gap between headline CPI and core CPI (the influence of fresh food) was 0.3 percentage points, narrowing from 0.5 points in the prior month. The gap between core CPI and core‑core CPI (the influence of energy) widened to −0.9 percentage points from −0.6 points the prior month, suggesting stronger downward pressure from energy prices. The structure in which core‑core CPI exceeds headline CPI by 1.2 percentage points indicates that price increases for goods and services excluding energy and food remain sustained.
In time series terms, headline CPI has decelerated for five consecutive months since peaking at 3.0% in October 2025, and core CPI has likewise fallen for four consecutive months from 3.0% in October. By contrast, core‑core CPI peaked in August 2025 at 3.3% and has declined only gradually; its rate of decline is slower than for the other two measures. This asymmetric movement suggests that stabilization in energy and food prices is driving the overall slowdown, while underlying inflationary pressure remains sticky.
The BOJ’s policy benchmark, core CPI (excluding fresh food), was 1.6% year‑on‑year in February 2026, which is 0.4 percentage points below the price stability target of 2%. The prior month exactly met the target at 2.0%, so the series fell below the target within one month. Since October 2025, core CPI has rapidly decelerated from 3.0% → 3.0% → 2.4% → 2.0% → 1.6%, a decline of 1.4 percentage points over four months. This pace of deceleration is notably faster than the acceleration seen during the inflation upturn since spring 2024 (monthly average +0.2–0.3 percentage points).
Evaluating the gap to the target, core CPI exceeded the target at 2.4%–3.0% from November 2025 through January 2026, but falling below it in February signals a new phase in the price environment. However, core‑core CPI remains at 2.5%, still 0.5 percentage points above the target, implying that the core CPI slowdown is likely driven mainly by a temporary fall in energy prices. To judge whether underlying inflationary pressure persistently exceeds the target, movements in measures that exclude energy price swings are important.
Looking back over the past 12 months, core CPI stayed at elevated levels of 3.2%–3.7% from March through October 2025, then decelerated sharply from November onward. This slowdown is thought to reflect calmer crude oil prices and yen appreciation stabilizing import prices since autumn 2024, together with the effect of government support measures for electricity and gas charges. If energy prices remain stable, core CPI is more likely to hover near the 2% target.
The BOJ’s trimmed mean—a measure of underlying inflation—was 2.2% year‑on‑year in February 2026, down 0.1 percentage points from 2.3% the prior month. The trimmed mean excludes the top and bottom 10% of item‑level inflation rates from the weighted average of CPI components and is intended to remove temporary volatility from energy, food, and other items to reveal the ‘‘true’’ inflation trend. A level of 2.2% is the lowest since August 2025 and indicates a clear deceleration in underlying inflationary pressure.
Comparing the trimmed mean and core CPI, the February trimmed mean of 2.2% exceeds core CPI (1.6%) by 0.6 percentage points. This divergence suggests that while core CPI has been pushed down by falling energy prices, many items excluding energy are still rising in the low‑to‑mid 2% range. Historically, the trimmed mean was at high levels of 2.7%–3.0% from March through November 2025, but has fallen over three consecutive months to 2.7% → 2.3% → 2.2% since December. This deceleration underscores a clear weakening in underlying inflation.
The weighted median was 1.7% in February, up 0.1 percentage points from 1.6% the prior month. The weighted median, the median of the distribution of item‑level inflation rates weighted by expenditure shares, is robust to outliers. A level of 1.7% is 0.3 percentage points below the BOJ’s 2% target, indicating that the center of the distribution of price changes is below the target. The difference between the trimmed mean (2.2%) and the weighted median (1.7%) is 0.5 percentage points, confirming a distribution structure where the upper side (high‑inflation items) is lifting the mean.
Over time, the trimmed mean peaked at 3.0% in June 2025 and has gradually declined by 0.8 percentage points over eight months. The weighted median remained around 1.9% from April through November 2025, then fell to 1.8% → 1.6% → 1.7% after December, showing a downward tendency. The slowdown in both measures suggests the ‘‘breadth’’ of price increases is narrowing and the number of high‑inflation items is falling. Relative to the BOJ’s 2% target, the trimmed mean exceeds it by 0.2 percentage points while the weighted median falls short by 0.3 points, implying underlying inflation pressure is hovering near the target.
BOJ statistics show the corporate goods price index (CGPI) was 128.3 (2020=100) in February 2026, down 0.1 point from 128.4 the prior month. CGPI is an upstream price indicator representing inter‑firm transaction prices for goods and tends to lead downstream consumer prices (CPI). The month‑on‑month decline—the first in four months since October 2025—indicates that upstream price pressures have eased.
Looking at the CGPI time series, it rose from 127.0 in July 2025 to 127.6 in August, 128.0 in September and 128.1 in October, but has been roughly flat at 128.4 → 128.3 since November. Month‑to‑month changes over the past six months were +0.6 in September, +0.4 in October, +0.1 in November, +0.3 in December, +0.3 in January and −0.1 in February, showing a clear slowdown in the pace of increases. This movement likely reflects stabilization in raw material prices and calmer foreign exchange movements.
Analyzing pass‑through from upstream to downstream, CGPI rose 127.0 → 128.3 (a 1.3‑point, or 1.0% increase) from July 2025 to February 2026, while the CPI headline rose 111.9 → 112.2 (a 0.3‑point, or 0.3% increase) over the same period. The upstream rise outpacing downstream suggests firms have not fully passed upstream cost increases through to consumer prices. Nevertheless, core‑core CPI slowed from 3.4% → 2.5% year‑on‑year over the same period but still maintained mid‑2% increases, implying cumulative past pass‑through may still be affecting prices.
The corporate services price index (SPPI) was 112.1 in February 2026, up 0.2 point from 111.9 the prior month. SPPI measures inter‑firm prices for services such as transport, communications, advertising, and leases; comparing SPPI with CGPI helps evaluate differences between goods and services price trends. From July 2025 to February 2026, SPPI rose from 111.1 → 112.1 (a 1.0‑point, or 0.9% increase), similar to the CGPI increase of 1.0%. Both goods and services show moderation in upstream price pressures.
Evaluating timing, CGPI has been roughly flat since November 2025 while headline CPI continued to rise until January 2026 and then turned down month‑on‑month in February. This roughly three‑month lag is consistent with the standard delay for upstream price stabilization to transmit to downstream prices. If CGPI remains flat, CPI upward pressure is likely to be further eased.
METI reports the seasonally adjusted index of industrial production was 102.2 in February 2025, up 2.3% from 99.9 the prior month. The month‑on‑month increase is the first positive reading in four months since October 2024, indicating some recovery in production activity. However, over the 12 months from March 2024 to February 2025, production rose only from 101.4 → 102.2 (a 0.8‑point, or 0.8% increase), so the recovery pace remains slow.
The Cabinet Office’s coincident index (CI coincident index) was 117.9 in January 2026, up 3.0 points from 114.9 the prior month. The CI coincident index synthesizes multiple indicators such as production, employment and consumption to indicate current economic conditions; a level of 117.9 is the highest in the past 12 months. After bottoming at 113.7 in August 2025, it rose to 114.9 in September and to 117.9 in January 2026, suggesting an economic pickup.
Analyzing the link between the real economy and prices, production recovery and a brighter economic picture coincide with falling inflation rates. This asymmetry suggests that easing supply constraints and weak demand are acting simultaneously. While the industrial production index is roughly flat year‑on‑year, the CPI headline rose 1.3% year‑on‑year, so production recovery has not yet generated significant upward pressure on prices. The rise in the CI could produce demand‑pull inflation via improved employment and incomes, but at present the impact on prices is limited.
The CI leading index was 112.1 in January 2026, up 4.1 points from 108.0 the prior month. The rise in the leading index suggests further cyclical improvement in the coming months, so demand conditions and their effect on prices require close monitoring. Although the leading index has trended up from its April 2025 low of 104.2, price inflation has decelerated over the same period, so the correlation between cyclical recovery and inflation remains weak.
The BOJ’s Tankan (short‑term economic survey of enterprises) for Q4 2025 shows the large‑manufacturer manufacturing business conditions DI was 15, up 1 point from 14 in the previous quarter. The large‑manufacturer non‑manufacturing DI held steady at 34, while the medium‑sized manufacturing DI improved from 12 to 16 and the small‑firm manufacturing DI rose from 1 to 6. Overall, firms’ business sentiment shows improvement.
Looking to the future, large‑manufacturer manufacturing firms expect the DI to be 12 (a 3‑point decline from current 15), and large‑manufacturer non‑manufacturing firms expect 28 (a 6‑point decline from current 34). The more cautious outlook likely reflects overseas economic uncertainty and exchange‑rate risks. The coexistence of improved current business conditions and cautious forward forecasts suggests firms may have more pricing power but are hesitant to raise prices aggressively amid uncertain demand.
The Tankan’s assumed exchange rate in Q4 2025 was 147.06 yen/USD for all firms and 146.48 yen/USD for large‑manufacturer manufacturing firms, revised toward yen depreciation from the prior quarter’s 145.68 and 145.61 respectively. Yen depreciation raises import prices; the Ministry of Finance’s trade statistics show import value in December 2025 was ¥10,312.9 billion, up 9.7% from ¥9,402.9 billion the prior month, suggesting upward pressure on import prices.
Evaluating corporate sentiment and prices, improved business conditions imply greater pricing power, yet actual inflation has slowed. This gap suggests firms may be realizing improvements via productivity gains or cost cutting rather than price increases. With a cautious forward outlook, firms may also be restraining pass‑through of costs due to demand uncertainty.
On the supply side, Ministry of Finance trade data indicate import value rose from ¥9,682.6 billion in September 2025 to ¥10,312.9 billion in December 2025, but later data are not provided. Rising import values suggest higher costs for imported raw materials and energy. Nonetheless, CGPI fell from 128.4 in January 2026 to 128.3 in February, indicating import price increases have not transmitted to upstream prices; this likely reflects exchange‑rate stabilization and calmer international commodity markets.
Evaluating the transmission chain (import prices → CGPI → CPI), CGPI stabilization has contributed to CPI deceleration. CGPI has been flat since November 2025 while CPI rose through January 2026 before turning down in February; this roughly three‑month lag is consistent with the standard transmission delay. If CGPI remains flat, CPI upward pressure should continue to ease.
On the demand side, METI’s retail sales statistics show retail sales were ¥1,272.8 billion in January 2025, up 4.4% year‑on‑year. Year‑on‑year gains have persisted since February 2024, indicating resilient private consumption. However, retail sales fell sharply from ¥1,609.7 billion in December 2024 to ¥1,272.8 billion in January 2025, likely reflecting seasonal post‑year‑end effects. While the year‑on‑year growth rate accelerated from 3.5% in December 2024 to 4.4% in January 2025, inflation decelerated over the same period, showing that demand growth is not translating directly into higher inflation.
Decomposing supply and demand factors, supply‑side stabilization in upstream prices has helped slow CPI, while demand‑side retail sales increases could generate upward pressure on prices. However, retail sales are nominal and include price effects, so the real extent of demand growth may be limited. The coexistence of decelerating inflation and rising nominal retail sales suggests that easing supply constraints are containing prices even as demand remains solid.
TOPIX fell from 3,772.17 on March 3, 2026 to 3,497.86 on March 31, a decline of 274.31 points (7.3%) over about one month. Large single‑day drops occurred on March 4 (3,633.67, −3.67% day‑on‑day), March 9 (3,575.84, −3.80% day‑on‑day) and March 23 (3,486.44, −3.41% day‑on‑day). While equity adjustments are not directly caused by changes in the price environment, they may reflect broader macroeconomic uncertainty.
Assessing the link between prices and equities, the February CPI slowdown would theoretically lengthen expectations of monetary easing and thus be positive for equities. In practice, equities fell substantially, suggesting other factors—overseas economic uncertainty, worsened corporate earnings prospects, geopolitical risk, etc.—are weighing on the market. The cautious forward outlook in the Tankan aligns with the equity correction.
Evaluating the effect of equity declines on prices, equity falls can reduce consumption via negative wealth effects and thus weaken demand‑pull inflation. However, retail sales were up 4.4% year‑on‑year in January 2025, so the immediate impact of the equity correction on consumption appears limited. If equity weakness persists, consumer sentiment could deteriorate and demand may slow further, reducing inflationary pressure.
Summing up February 2026 price developments, underlying inflationary pressure has clearly eased and convergence toward the BOJ’s 2% price stability target has accelerated. The trimmed mean fell to 2.2%, the lowest since August 2025, and core CPI fell to 1.6%, 0.4 percentage points below the target. With upstream prices (CGPI) stabilizing while demand remains firm, the slowdown in inflation is judged to be driven primarily by easing supply constraints.
Looking ahead, if CGPI remains in a flat range, downstream CPI is likely to decelerate further. Continued declines in the trimmed mean would imply underlying inflation approaching the 2% vicinity. However, core‑core CPI remains at 2.5%, still above the target, so a temporary fall in energy prices may be driving the core CPI slowdown. If energy prices resume upward momentum, core CPI could again exceed the target.
Policy implications: core CPI below the target reduces expectations for further BOJ rate hikes. Nevertheless, with the trimmed mean at 2.2%—still above the target—underlying inflationary pressure remains. The BOJ emphasizes assessing the underlying inflation trend without being swayed by temporary energy price swings; hence the trimmed mean will be a focal point for policy decisions. If the trimmed mean falls toward the 2% area, the pace of monetary policy normalization could slow.
Household impact: slowing inflation contributes to real purchasing power gains. With core CPI down to 1.6%, real wages could turn positive if wage growth is around 2%. However, core‑core CPI at 2.5% means that basic goods and services excluding energy and food remain rising, weighing on households. If underlying inflation eases further, households’ real purchasing power should improve noticeably.
Key risks include exchange‑rate swings, a renewed rise in international commodity prices, and weaker external demand that reduces export demand. The Tankan’s cautious forward outlook and the equity market correction signal that these risks could materialize. To accurately assess the underlying inflation trend, continued monitoring of the BOJ’s trimmed mean and the weighted median—measures that abstract from temporary energy price swings—is essential.
Core CPI: Consumer Price Index excluding fresh food. By removing fresh food, which fluctuates with weather, this measure captures the underlying movement of prices. The BOJ uses it when judging its price stability target (year‑on‑year 2%).
Core‑core CPI: Consumer Price Index excluding fresh food and energy. By also excluding energy price swings, this indicator measures more persistent underlying inflationary pressure.
Trimmed mean: A weighted average of CPI item‑level inflation rates after excluding the top and bottom 10% of the distribution. It removes the influence of extreme price moves to show the underlying inflation trend. The BOJ places emphasis on this measure.
Corporate goods price index (CGPI): An index of prices for goods transacted between firms, representing upstream (producer‑stage) prices. It tends to lead downstream consumer prices (CPI).
Corporate services price index (SPPI): An index of prices for services transacted between firms, covering transport, communications, advertising, leases, etc. Comparing SPPI with CGPI helps evaluate differences in price trends between goods and services.
Weighted median: The median of the distribution of CPI item‑level inflation rates, taking expenditure weights into account. Being robust to outliers, it is a key measure of underlying inflation alongside the trimmed mean.
Composite Index (CI): An index that synthesizes multiple economic indicators—production, employment, consumption—to indicate current and future economic conditions. The CI coincident index shows the current state of the economy; the CI leading index signals the near‑term outlook.
Business conditions DI: The DI (diffusion index) from the BOJ Tankan survey that measures firms’ assessment of business conditions. It is calculated as the percentage of firms reporting "favorable" conditions minus the percentage reporting "unfavorable" conditions; higher positive values indicate a larger share of firms viewing conditions as good.
This column was automatically generated by AI integrating Cabinet Office GDP data, Bank of Japan statistics, e-Stat public statistics, and market data as a macroeconomic analysis resource. This is not a recommendation to invest in any specific security. Please make investment decisions at your own responsibility and consult professionals as needed.