The Tokyo CPI released today showed a 1.9% year-on-year increase in the headline index for August. This was up from 1.8% in the previous month, marking three consecutive months of acceleration.
Tokyo CPI Flash: All Three Measures Accelerate, Dining Out Returns to the 5% Range
In August, all three Tokyo CPI measures—headline, core and core-core—accelerated from the previous month. This was the first such move since the beginning of the year and suggests that inflationary pressure is broadening.
| Month | All items | Core-core | Eating out | Recreation services |
|---|---|---|---|---|
| Mar 2026 | 1.5 | 2.2 | 4.4 | 2.7 |
| Apr 2026 | 1.4 | 1.7 | 4.0 | 2.1 |
| May 2026 | 1.3 | 1.5 | 4.0 | 2.2 |
| Jun 2026 | 1.6 | 1.7 | 4.4 | 1.7 |
| Jul 2026 | 1.8 | 1.8 | 4.5 | 1.6 |
| Aug 2026 | 1.9 | 2.0 | 5.0 | 1.1 |
All figures are year-over-year (%).
The headline index rose 1.9% year on year, while core CPI, excluding fresh food, increased 1.8%, and core-core CPI, excluding fresh food and energy, rose 2.0%. All three measures were up 0.1–0.2 percentage points from July. Particularly noteworthy was the year-on-year increase in dining-out prices, which jumped from 4.5% in July to 5.0% in August, a 0.5 percentage-point increase. This was the highest growth rate since March and indicates that pass-through to service prices is accelerating again. By contrast, culture and recreation services slowed from 1.6% in July to 1.1% in August, indicating variation in the pace of price pass-through within the service sector.
Distance from the BOJ Target: Core CPI Nears 2% but Remains Below Target
The 1.8% year-on-year increase in core CPI was 0.2 percentage points below the BOJ’s 2% price stability target. However, the target has not yet been reached.
Tokyo core CPI had been on a declining trend after peaking at 2.8% in November 2025, slowing to 1.9% in February 2026. It subsequently went through a further slowdown to 1.2% in May before turning upward and accelerating for three consecutive months from June onward. Whether this reversal is temporary or marks the beginning of a new trend will be an important issue to assess when the September figures are released. Core-core CPI stood at 2.0%, above core CPI, indicating that underlying inflationary pressure excluding fresh food and energy is stronger than indicated by the core measure.
Comparison with National CPI: Tokyo Has Already Reached a Higher Level than the Nationwide Measure
Tokyo CPI movements lead national CPI by approximately two to three weeks. Comparing the latest national CPI for July with Tokyo CPI for August suggests that acceleration in Tokyo is occurring somewhat earlier.
| Measure | National CPI (July) | Tokyo CPI (August) | Difference |
|---|---|---|---|
| Headline YoY | 1.9% | 1.9% | 0.0pt |
| Core YoY | 1.8% | 1.8% | 0.0pt |
| Core-core YoY | 1.9% | 2.0% | +0.1pt |
| Dining-out YoY | 1.7% | 5.0% | +3.3pt |
The table shows that headline and core inflation are broadly at the same levels in Tokyo and nationwide, while the divergence in dining-out prices is extremely large. Tokyo dining-out prices have risen sharply ahead of the national average, and this movement should be monitored for possible spillover when national CPI figures are released in the coming months. Nationwide dining-out inflation had been on a declining trend after peaking at 4.3% in October 2025, slowing to 1.7% as recently as July. The reacceleration of Tokyo dining-out prices to 5.0% could foreshadow a rebound in the nationwide measure.
Corporate Sentiment and the Cost Pass-Through Environment: Improved Nonmanufacturing Conditions Support Price Pass-Through
The BOJ Tankan business conditions diffusion index for large nonmanufacturers rose to 37.0 in the second quarter of 2026, its highest level in the past four quarters. Conditions among small and medium-sized manufacturers also improved to 9.0, indicating that the improvement in corporate sentiment is continuing.
Improved conditions in the nonmanufacturing sector may reflect a recovery in the earnings environment for industries including dining out and face-to-face services. The outlook DI for large nonmanufacturers was somewhat cautious at 29.0, but no sharp deterioration from recent levels is expected. The continued willingness of companies to raise prices may be one factor supporting the rise in Tokyo dining-out prices. However, the Tankan data alone cannot identify the specific progress of cost pass-through, making it necessary to compare them with future corporate price statistics and trends in the selling-price DI.
Market Reaction: TOPIX Firm Throughout the Month, Limited Inflation Concerns
TOPIX remained firm throughout August. It rose approximately 4.7%, from 3960.03 at the start of the month on August 3 to 4146.71 at the end of the month on August 28.
Within the month, the index suffered a substantial 3.09% day-on-day decline on August 19, but this was limited to a one-day correction, followed by a 1.18% rebound on August 20. It subsequently remained firm within a range of 4000–4160, with no sharp shift in interest-rate expectations or disruption in equity markets following the acceleration in Tokyo CPI. At this point, the market may not be pricing the acceleration in Tokyo CPI as a signal of excessively rapid inflation.
Outlook: Potential Acceleration in National CPI, with Dining-Out Prices in Focus
The acceleration of all three Tokyo CPI measures suggests that similar acceleration could appear in the next national CPI release, covering August and scheduled for late September.
The key points to monitor are as follows.
- Dining-out prices: Tokyo accelerated to 5.0%. The main focus is whether the national measure, which stood at 1.7% as of July, follows with an increase
- Core-core CPI: Tokyo stood at 2.0%, above core CPI. This is important for assessing the persistence of underlying inflationary pressure
- Culture and recreation services: Tokyo slowed to 1.1%. It is important to note that service-price growth is not uniform overall
Tokyo core CPI has approached the BOJ’s 2% price stability target, reaching 1.8%. If national CPI accelerates similarly and approaches 2%, this could affect the discussion surrounding the sustainability of achieving the price target in the conduct of monetary policy. Both the next national CPI release and the September Tokyo CPI flash will be important data points for assessing the trend ahead.
Glossary
| Term | Definition |
|---|---|
| Tokyo CPI | The consumer price index calculated for Tokyo’s 23 wards. Because it is released earlier than national CPI, it is monitored as a leading indicator that anticipates nationwide price trends by approximately two to three weeks. |
| Core CPI | The headline index excluding fresh food. By excluding fresh food, which is susceptible to weather-related fluctuations, it is used to capture underlying price trends. |
| Core-core CPI | The headline index excluding fresh food and energy. By also excluding energy, which is susceptible to international commodity-market conditions, it indicates more underlying price trends. |
| Business Conditions Diffusion Index | An indicator of corporate sentiment in the BOJ Tankan survey. It is calculated by subtracting the percentage of companies reporting conditions as “悪い” (unfavorable) from the percentage reporting conditions as “良い” (favorable). |
| Price Stability Target | The 2% year-on-year increase in consumer prices that the Bank of Japan has established as its target for monetary policy management. |
| Price Pass-Through | The process by which companies pass higher costs, such as raw-material and labor costs, on to final consumers through increases in selling prices. |
This column was automatically generated by AI integrating e-Stat public statistics (Consumer Price Index), Bank of Japan statistics, and market data as a price trend analysis resource. This is not a recommendation to buy or sell any financial instruments. Please make investment decisions at your own responsibility and consult professionals as needed.