Tokyo CPI Preview: Core Inflation Set to Accelerate to 1.6%

Tokyo's consumer price index is set to accelerate in June for the first time in eight months. The move is driven by higher energy costs and lingering supply concerns tied to Middle East tensions after the US-Iran conflict.

Economists expect the closely watched core measure, which strips out fresh food, to rise 1.6% on the year. That would be up from 1.3% in May, which was the weakest reading since March 2022. Core inflation has fallen sharply from a 3.6% gain recorded in May 2025. The broader CPI is tipped to climb 1.7%, compared with 1.4% in May and the highest since December's 2.0% print. The core-core gauge, which also excludes energy, is seen edging up to 1.8% from 1.6%.

Easing food inflation is providing some relief on the headline. Rising global commodity costs are beginning to filter through, especially for naphtha, oil products and chemicals, traders said. Government support measures – a cap on retail gasoline prices near 170 yen per litre and a summer waiver on Tokyo water charges – should cushion the upside. They are unlikely to fully offset higher import costs.

The Tokyo CPI print is the first major inflation read for the June data cycle. Bank of Japan board members have signaled they need to see a sustained pickup in underlying inflation before hiking rates again. A 1.6% core print would still be below the central bank's 2% target, leaving room for the BOJ to hold policy steady at its next meeting. The yen has been under pressure from widening rate differentials with the US. A stronger-than-expected Tokyo reading could offer some near-term support by raising the odds of a BOJ move later this year. A miss to the downside would likely reinforce the view that Japan's inflation momentum is fading.

Friday's calendar is thin beyond the Tokyo release. No other major data are scheduled for the Asia session, making the CPI figures the sole catalyst for yen pairs through the morning. The data will be released at 8:30 a.m. Tokyo time.