Japan's inflation recedes, easing pressure for interest rate hikes.

• Japan's inflation slows and affects BOJ interest rates.
• Weak yen increases pressure on the Japanese economy in 2026.
• Bank of Japan assesses interest rate after new data.

Japan's underlying inflation slowed more than expected in April, hitting its lowest level since March 2022. This result eased some of the pressure on the Bank of Japan to anticipate another interest rate hike, while investors closely monitor the country's next monetary policy moves.

Japan's core inflation, which excludes fresh food, stood at 1,4%. This figure was below the 1,7% projection made by economists polled by Reuters and also lower than the 1,8% recorded in the previous month.

Headline inflation also slowed to 1,4%, down from 1,5% in March. This meant the indicator remained below the Bank of Japan's official 2% target for the fourth consecutive month.

Another indicator closely monitored by the monetary authority, known as "core-core" inflation, which excludes food and energy, fell from 2,4% to 1,9%. This movement reinforced the perception that domestic inflationary pressure has weakened in recent weeks.

Energy prices fell 3,9% in April, following a 5,7% decline in March. This performance in the sector occurred amid tensions involving Iran and volatility in the international oil market.

Following the release of the figures, the Nikkei 225 index opened 0,96% higher, leading gains among major Asian markets. At the same time, the yen weakened slightly against the dollar, trading in the 159,03 range.

At its April meeting, the Bank of Japan raised its underlying inflation forecast from 1,9% to 2,8%, citing the impact of higher oil prices and the passing on of costs to consumers by Japanese companies.

The new data also emerges amid discussions about possible fiscal stimulus measures. According to broadcaster NHK, opposition lawmakers advocated for a 3 trillion yen package, including extended fuel subsidies and reductions in electricity bills.

Japan is still facing difficulties related to the weak yen. Between the end of April and the beginning of May, the Japanese government reportedly used approximately 10 trillion yen in currency interventions to try to curb the devaluation of the currency.

Even with more moderate inflation, analysts believe that an interest rate hike remains on the radar. The Japanese economy grew 2,1% annualized in the first quarter of 2026, a result above market expectations and mainly supported by increased exports.