Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Inflation in Japan - statistics & facts
Japanese consumers and corporations are finding themselves in a new environment: inflation has returned to the country. 2024 was the third consecutive year of consumer prices increasing by more than two percent. After over three decades of struggles with deflation, rising prices are relatively new territory for Japan. A combination of factors, including the global COVID-19 pandemic and Russia’s invasion of Ukraine, led to high inflation rates in many countries from the end of 2021. The Japanese economy showed a delayed response in comparison, but inflation took hold from 2022 onwards. What was welcomed as a positive sign for Japan’s economy, has been, on the contrary, a concern for individual consumers, who are confronted with the increased cost of living.
The CPI measures what households have to pay for a set basket of goods and services over time. Annual or monthly changes in the index are referred to as the CPI inflation rate. Japan has struggled with deflation and stagnating prices since the burst of the speculative asset price bubble in the early 1990s and the following decade of economic recession. For the past decades, Japan’s central bank, the Bank of Japan, has therefore pursued a policy of monetary easing, aimed at achieving a price stability target of two percent. An inflation rate of two percent is generally considered a healthy level of inflation, as it is thought to drive consumption and stimulate economic growth.
However, households have been hit hard by the increased cost of living. Compared to other major economies, Japan’s inflation rate has remained low, but wage growth in the country has not kept up with the rising consumer prices. This disparity consequently resulted in reduced purchasing power of households and affected consumer spending. For 2025, salary increases are therefore deemed crucial to support household consumption and achieve a virtuous cycle between prices and wages.
Rising food prices were the main contributor to inflation
Japan’s consumer price index (CPI) rose by 2.7 percent in 2024. Food contributed the most to the annual price change rate in 2024, followed by culture and recreation, which saw the highest consumer price growth. The core inflation rate, excluding volatile fresh food prices, stood at 2.5 percent.The CPI measures what households have to pay for a set basket of goods and services over time. Annual or monthly changes in the index are referred to as the CPI inflation rate. Japan has struggled with deflation and stagnating prices since the burst of the speculative asset price bubble in the early 1990s and the following decade of economic recession. For the past decades, Japan’s central bank, the Bank of Japan, has therefore pursued a policy of monetary easing, aimed at achieving a price stability target of two percent. An inflation rate of two percent is generally considered a healthy level of inflation, as it is thought to drive consumption and stimulate economic growth.
Monetary policy changes and impact on households
Japan welcomed rising prices as a possible sign that the decade-long struggle with economic stagnation and deflation might come to an end. As a result of prolonged inflation, the Bank of Japan entered a path of monetary policy normalization in March 2024, ending its negative interest rate policy adopted in 2016 to counter deflation.However, households have been hit hard by the increased cost of living. Compared to other major economies, Japan’s inflation rate has remained low, but wage growth in the country has not kept up with the rising consumer prices. This disparity consequently resulted in reduced purchasing power of households and affected consumer spending. For 2025, salary increases are therefore deemed crucial to support household consumption and achieve a virtuous cycle between prices and wages.
