The Bank of Japan announces an additional monthly release of "Core CPI," hinting at a rate hike for Sanae Takashi?

The Bank of Japan announced that starting this month, it will release a “Core CPI Reference Indicator” each month, attempting to demonstrate to the market that underlying inflationary pressures remain strong, even though official CPI has fallen below 2%. Analysts suggest this is more like a “show of opposition” by the central bank against Prime Minister Sanae Takashi.

(Background: The BOJ maintained interest rates at 0.75%, as expected, with Middle Eastern conflicts pushing up oil prices adding a new variable to rate hikes.)
(Additional context: Japan’s CPI exceeded expectations—will there be a rate hike in December? Beware of the yen arbitrage hot money withdrawal, repeating the August stock market crash.)

The BOJ has taken action: starting this month, it will publish an additional set of economic data called the “Core CPI Reference Indicator” on the second business day afternoon at 2 p.m. after each official CPI release. Officially, it is meant to assist in assessing core inflation, but widely believed to be a justification for the BOJ’s hawkish stance.

This all began when Japan’s core CPI year-over-year fell to 1.6% in February, breaking the critical 2% threshold and hitting a four-year low. Logically, with such low inflation, the central bank should not continue raising rates, but BOJ Governor Ueda Kazuo has not signaled any tightening.

Are official figures being “artificially suppressed”?

The central bank’s current move to release core data aims to point out that “CPI figures are being artificially suppressed,” because the Japanese government has implemented energy subsidies and other policies to curb inflation perceptions, which directly lower consumer prices.

Excluding fresh food and energy, the “core CPI” remains at 2.5%, well above the official figure. The BOJ’s release of this core indicator is meant to show the market the “true” inflation rate in their view.

Investinglive analyst Justin Low interprets this as:

More of a way to demonstrate to the public and the market that they (the BOJ) are still on the right track with their monetary policy.

Tensions between the BOJ and the Prime Minister

There is also a political dimension: in February, Japanese Prime Minister Sanae Takashi held a public meeting with BOJ Governor Ueda Kazuo, explicitly expressing “a desire to keep current interest rates unchanged,” hoping not to disrupt government fiscal and economic policies with rate hikes.

The BOJ’s current benchmark rate is 0.75%. The March meeting decided to keep it unchanged, seemingly aligning with Takashi’s expectations. Now, with the release of this new indicator, Japanese commentators generally interpret it as “a slight act of defiance” against the government—indicating rates will stay steady for now, but the BOJ needs a reason to justify its next move.

The market currently expects the BOJ to possibly raise rates again by mid-2026, pushing rates to 1.0%. This new data could serve as a pre-hike signal.