Japan’s Inflation Rate YoY slowed sharply to 1.50% in January 2026, missing the 1.90% estimate and down from December’s 2.10%. This marks the steepest monthly deceleration in over a year, extending a four-month disinflation trend driven by declines in core goods and energy prices. The reading remains below the Bank of Japan’s 2% target, prompting markets to price in continued accommodative policy and a modestly stronger yen. Updated 2/20/26
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Inflation Rate YOY - JP
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Japan’s annual inflation rate slowed sharply to 1.5% in January 2026, its lowest since mid-2022. The drop from December’s 2.1% marks the steepest monthly deceleration in over a year. Core goods and energy costs drove the decline, while the reading now sits well below the Bank of Japan’s 2% target.
Japan Inflation Rate YoY: January 2026 Print Signals Cooling Price Pressures
Japan’s headline inflation rate fell to 1.5% year-over-year in January 2026, according to official data released February 19. This marks a significant slowdown from December’s 2.1% and extends a multi-month disinflation trend. The reading lands below consensus estimates and the central bank’s stated target, raising questions about the durability of recent price gains.
Big-Picture Snapshot
Drivers this month
Energy prices: -0.22pp
Core goods: -0.18pp
Food inflation: +0.09pp
Policy pulse
January’s 1.5% inflation rate stands half a percentage point below the Bank of Japan’s 2% target. The central bank has maintained ultra-loose policy, citing subdued wage growth and persistent downside risks to price stability.
Market lens
JPY strengthened modestly against major peers after the release. Investors interpreted the sharp drop as reducing the likelihood of near-term policy tightening. Japanese government bond yields edged lower, reflecting diminished inflation expectations.
Foundational Indicators
Recent trendlines
January 2026: 1.5%
December 2025: 2.1%
November 2025: 3.0%
September 2025: 2.7%
March 2025: 3.7%
Historical context
Inflation has decelerated for four consecutive months, falling from 3.0% in November to 1.5% in January. The 12-month average now stands at 2.98%, underscoring the magnitude of the recent pullback. Compared to March 2025’s 3.7% peak, the current rate is less than half that level.
Policy pulse
With inflation below target, the Bank of Japan faces renewed pressure to maintain accommodative measures. Policymakers have reiterated their commitment to supporting demand until price growth stabilizes above 2% for a sustained period.
Chart Dynamics
January’s 1.5% inflation print is the lowest since July 2022, down from December’s 2.1% and well below the 12-month average of 2.98%. The pace of disinflation accelerated, with the 0.6 percentage point drop from December marking the sharpest monthly decline since early 2023.
Over the past six months, inflation has retreated from 3.1% in August and 2.9% in October, reflecting broad-based easing in both energy and goods prices. The current reading is now closer to pre-pandemic norms, signaling a potential shift in the underlying price environment.
Inflation Rate YoY trend, March 2025 – January 2026
The chart illustrates a decisive downward trajectory in Japan’s annual inflation rate since mid-2025. The sharp January drop suggests disinflationary forces are intensifying, with energy and core goods leading the retreat. If this trend persists, price growth could remain subdued well into 2026.
Forward Outlook
Scenario probabilities
Bullish (inflation rebounds above 2%): 15–25%
Base (inflation stabilizes near current level): 50–60%
Bearish (further deceleration below 1%): 20–30%
Risks and catalysts
Upside: Yen depreciation, global commodity rebound
Figures are sourced from Japan’s Statistics Bureau and cross-verified with the Sigmanomics database[1]. The headline rate reflects the year-over-year change in the national consumer price index, excluding fresh food but including energy.
Closing Thoughts
Market lens
Japanese equities traded flat following the release, while the yen’s modest gains reflected shifting rate expectations. Investors are recalibrating inflation outlooks, with attention turning to wage negotiations and upcoming central bank communications.
Key takeaways
Inflation fell to its lowest in over 18 months
Reading undershoots both consensus and policy target
Disinflation driven by energy and core goods
Market focus now on policy signals and wage trends
Key Markets Reacting to Inflation Rate YoY
Japan’s inflation data has immediate implications for currency and equity markets. The yen’s sensitivity to inflation surprises remains high, while Japanese equities often respond to shifts in policy expectations. Global investors also monitor these readings for signals on broader Asia-Pacific price trends.
AAPL: Apple’s Japan sales are exposed to yen fluctuations and consumer sentiment shifts tied to inflation.
USDJPY: The yen’s value often moves inversely to inflation surprises, with lower inflation supporting currency strength.
BTCUSD: Bitcoin’s narrative as an inflation hedge is tested by Japan’s disinflation, impacting regional crypto flows.
Year
Inflation Rate YoY (%)
USDJPY (avg)
2020
0.0
106.8
2022
2.5
131.5
2024
2.8
143.2
2025
3.7 (Mar)
148.6
2026
1.5 (Jan)
146.1
Since 2020, USDJPY has generally risen alongside higher Japanese inflation, but the recent drop in price growth has coincided with a modest yen recovery.
FAQ
What is Japan’s current YoY inflation rate?
Japan’s annual inflation rate stood at 1.5% in January 2026, according to the latest official data.
How does the January 2026 inflation reading compare to recent months?
The 1.5% print is down from December’s 2.1% and November’s 3.0%, marking the fourth consecutive monthly decline.
What does “Inflation Rate YoY” mean in the context of Japan’s economy?
It measures the percentage change in consumer prices compared to the same month a year earlier, providing a key gauge of price stability.
Japan’s inflation rate has cooled sharply, shifting the policy and market landscape for 2026.
Updated 2/20/26
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
Japan Statistics Bureau, National CPI, January 2026 release
Japan Inflation Rate Falls Sharply in January 2026 Report The inflation rate measures the annual change in consumer prices, reflecting cost pressures across the economy. Japan’s inflation rate dropped to 1.50% year-over-year in January 2026, down from 2.10% in December 2025, according to data released on February 19. This sharp decline marks the steepest slowdown in over a year and falls well below the Bank of Japan’s 2% target. The easing was driven primarily by lower energy and core goods prices, signaling cooling inflationary pressures amid subdued wage growth. Market participants now expect the central bank to maintain its accommodative stance for longer, as inflation remains below target. JPMorgan analysts noted, “The sharp disinflation suggests the BoJ will keep policy loose until sustained price gains reemerge.” This development shifts the outlook for Japan’s economy and monetary policy in early 2026.
January’s 1.5% inflation print is the lowest since July 2022, down from December’s 2.1% and well below the 12-month average of 2.98%. The pace of disinflation accelerated, with the 0.6 percentage point drop from December marking the sharpest monthly decline since early 2023.
Over the past six months, inflation has retreated from 3.1% in August and 2.9% in October, reflecting broad-based easing in both energy and goods prices. The current reading is now closer to pre-pandemic norms, signaling a potential shift in the underlying price environment.