Japan Tightens Into Inflation Its Own Data No Longer Shows

The Bank of Japan raised its policy rate on June 16 to 1.00%, the highest level since 1995. The bond market had already moved: 10-year JGB yields touched a 29-year high near 2.8% in May, per Nikkei Asia, and stayed elevated through June.

By the usual reading, that’s a central bank catching up with inflation. The price data disagrees.

May core inflation ran near 1.3%, a four-year low, below consensus and beneath the BOJ’s 2% target for a fourth straight month, per Investing.com’s coverage of the release. The bank’s own underlying inflation gauges all slipped below 2% in April, the first time since 2022.

So the policy rate, the bond market, and the BOJ’s forecasts all point up, while measured inflation cools. The justification on offer is a forecast, that the energy shock feeding into prices will broaden, not the data currently in hand.

What this doesn’t show: the CPI figures here come from secondary summaries rather than a direct read of the Statistics Bureau release, and the May core number splits between 1.3% and 1.4% depending on the source.