Japan’s core inflation hit 3.7% and interest rates might increase

In May 2025, Japan’s core inflation hit 3.7%, the highest since January 2023, increasing pressure on the Bank of Japan to raise interest rates amid ongoing concerns over US tariffs.

Food prices are a significant driver of inflation, with rice costing double compared to May 2024 and chocolate prices rising by 27%. This trend reflects broader inflationary pressures across various services.

The Bank of Japan’s decision-making body is divided on when to hike rates, with concerns that inflationary pressures could persist, leading to potential delays in their actions.