Japan's core inflation cools in June as expected, coming down from 29-month high as rice prices ease

• Headline inflation in the country dropped to 3.3%, coming down from 3.5% in May.
• The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed to 3.4% from 3.3% in the month before.
• The increase in rice prices slowed marginally to a 100.2% increase year-on-year, down from 101.7% in May

Japan's core inflation cooled to 3.3% in June, coming down from a 29-month high of 3.7% as rice inflation showed signs of easing.

The figure — which strips out costs for fresh food — was in line with the 3.3% expected by economists polled by Reuters.

Headline inflation in the country dropped to 3.3%, coming down from 3.5% in May.

The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is closely monitored by the BOJ, climbed to 3.4% from 3.3% in the month before.

Rice prices, which have seen their fastest rate of increase in over half a century in May, saw a slight easing to a 100.2% increase year over year, compared to the 101.7% jump in May.

Rice prices have begun to decline after the government released its stockpiles earlier this year, although prices remain elevated.

Japan had struggled with rising rice prices over the second half of 2024 and the first half of 2025 due to poor harvests in 2023.

The data released on Friday comes as Japan grapples with concerns over growth due to Trump's tariffs, while the cost of living is expected to dominate an upcoming Upper House election.

U.S. President Donald Trump also reportedly said that he does not expect a deal with Japan, raising fears of higher tariffs that could hinder growth.

Japan's first-quarter gross domestic product declined for the first time in a year, falling 0.2% quarter over quarter in the three months ended March as exports fell sharply.

Japan faces a 25% tariff that will come into effect on August 1, and currently faces a 25% levy on automobiles, which are its largest export to the U.S.

The inflation reading will support the case for the Bank of Japan to raise rates, as the headline inflation rate has run above the BOJ's 2% target for 39 consecutive months.

However, analysts from Bank of America do not expect any rate hike until January 2026, stating in a Wednesday note that inflation expectations, which they say BOJ Governor Kazuo Ueda views as a proxy for “underlying inflation,” remain below 2%.