In October 2024, Tokyo’s core consumer price index (CPI) rose 1.8% year-on-year, marking a slowdown from 2% in September and reaching its lowest level since April. This latest figure, slightly above the forecast of 1.7%, highlights a cooling trend in inflation for Tokyo, often seen as a bellwether for national price trends. With national CPI data expected in about three weeks, analysts are closely watching this trend for signs of broader shifts across Japan.

Easing Inflation and Political Uncertainty Challenge Bank of Japan’s Rate Path

The easing inflation in Tokyo, combined with growing political uncertainty, has cast doubt on the likelihood of further rate hikes from the Bank of Japan (BOJ). These factors weigh heavily on the BOJ’s policy considerations as it balances inflation control with economic stability.

BOJ board member Seiji Adachi recently underscored the need for caution, stressing that rate increases should proceed at a “very moderate” pace. He warned against any drastic policy shifts given the uncertainties around global economic conditions and domestic wage growth.

What’s Next for Japan’s Economic Outlook?

As inflation continues to ease, the BOJ faces complex challenges in maintaining economic momentum while keeping inflation in check. Tokyo’s latest CPI reading is a key indicator, and analysts will watch upcoming national CPI data closely to see if the trend continues.