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Japan's Inflation Eases to 3.7% in February, but Household Costs Remain High

The Bank of Japan holds steady on interest rates as wage growth and government subsidies shape the economic outlook.

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Government subsidies for electricity and gas fees contributed to the easing in the pace of inflation
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Overview

  • Headline inflation in Japan slowed to 3.7% in February 2025, down from a two-year high of 4% in January, but remains above the Bank of Japan's 2% target.
  • Core inflation, excluding fresh food, dropped to 3%, while 'core-core' inflation, which excludes fresh food and energy, rose slightly to 2.6%.
  • Government subsidies for electricity and gas fees contributed to the easing of inflation, though rising prices for essentials like food and accommodation continue to strain households.
  • Japan's largest labor union secured a historic 5.46% wage increase for 2025, the highest in over three decades, potentially influencing future inflation trends.
  • The Japanese government auctioned emergency rice stockpiles to combat surging prices caused by supply chain disruptions and poor agricultural output.