Core consumer prices in Tokyo’s central wards rose 1.3% year-on-year in May 2026, slowing from 1.5% in the previous month and coming in softer than market expectations of 1.5%. The reading marked the slowest pace since March 2022, indicating further moderation in price momentum. Inflation remained below the Bank of Japan’s 2% target for a fourth consecutive month, as fuel subsidies and favorable base effects helped limit the impact of higher raw material costs linked to the Middle East conflict. However, policymakers are growing more concerned about the possibility that higher oil prices could boost underlying inflation in the country. Companies might start passing higher costs on to consumers, as years of sustained inflationary pressures have made businesses more comfortable raising prices.