Tokyo's inflation is slowing down, sending a new signal to the Bank of Japan.

In January 2026, core consumer inflation in Tokyo fell again, providing new reference data for the Bank of Japan to consider the timing of the next rate hike. The weakening of the yen poses a risk to the Bank of Japan's efforts to nurture demand-driven benign price increases, further emphasizing the importance of inflation-related signals. As a leading indicator of national inflation trends in Japan, the inflation data released in Tokyo this time showed a slight easing of price pressure in January. Data released by the Japanese government on Friday showed that Tokyo's core inflation rose by 2.0% year-on-year, excluding volatile fresh food prices, compared to 2.3% in December 2025. The data service provider Quick had previously predicted a value of 2.2% for January. The Bank of Japan raised its policy rate to a three-decade high in December last year, and last week it kept the rate unchanged at 0.75%. Although BOJ Governor Haruhiko Kuroda insisted that the central bank's policy operations were not lagging behind, a significant depreciation of the yen could change Japan's domestic inflation trajectory. Continued depreciation of the yen will raise import prices, adding to the pressure on Japanese households already coping with rising living costs. Kuroda has previously stated that exchange rate volatility deserves close attention; he also added that companies are increasingly willing to pass on rising costs to consumers, making the impact of exchange rate fluctuations on firms' pricing behavior more significant than before.