Japan's core inflation fell to 1.6% in February 2026, below the 2% target, due to energy subsidies and lower energy costs, though underlying inflation held at 2.5%.

Japan's core inflation slowed to 1.6% in February 2026, the first time below the Bank of Japan’s 2% target since 2022, driven by government energy subsidies and lower energy costs, though underlying inflation excluding food and energy remained at 2.5%. Despite the dip, rising oil prices from Middle East tensions and a weak yen pose risks of renewed inflation, prompting the BOJ to plan a new inflation gauge to filter out temporary policy effects.