The TL;DR summary:Tokyo core CPI slowed to 2.3% y/y in Dec (vs. prev 2.8%, exp 2.5%), driven by lower energy and utility costs.Core-core CPI eased to 2.6% y/y (prev 2.8%), but remains above the BOJ’s 2% target, signalling persistent demand-side pressure.Headline CPI cooled to 2.0% y/y (prev 2.7%), marking the first clear deceleration since August.Data softens urgency, not direction, of BOJ policy; inflation remains consistent with gradual further tightening after last week’s hike to 0.75%.Market read-through: modest yen softness near term, JGB front-end consolidation, Nikkei supported by reduced immediate tightening risk.The screenshot above is via TradingEconomics. —Tokyo inflation cooled more than expected in December, but remained comfortably above the Bank of Japan’s 2% target, keeping the policy normalisation story intact even as near-term urgency eased.Core consumer prices in the capital, excluding fresh food, rose 2.3% y/y, slowing from 2.8% in November and undershooting market expectations of 2.5%. The deceleration was driven largely by lower utility and energy costs, alongside a moderation in food price gains.A closely watched “core-core” measure that strips out both fresh food and energy also softened, easing to 2.6% y/y from 2.8% previously, while headline CPI slowed to 2.0% from 2.7%. Together, the figures marked the first clear easing in Tokyo inflation momentum since August.Despite the slowdown, all three gauges remain at or above the BOJ’s inflation target, reinforcing the view that underlying price pressures have become entrenched. Tokyo CPI is widely regarded as a leading indicator for nationwide trends, suggesting inflation is cooling gradually rather than collapsing.The data follows last week’s Bank of Japan decision to raise its policy rate to 0.75%, the highest level in roughly three decades. Governor Kazuo Ueda has stressed that further tightening will follow if wages and prices evolve in line with the central bank’s outlook, while deliberately avoiding guidance on pace or terminal levels.Markets now see the December data as consistent with the BOJ’s baseline scenario: inflation easing as energy effects fade, but remaining sufficiently firm to justify additional rate hikes over time. Analysts continue to expect a gradual hiking cycle, with rates rising roughly every six months and a terminal level near 1.25%, assuming wage growth remains solid. BOJ policy implicationsThe softer-than-expected core print slightly reduces pressure for an imminent follow-up hike but does little to derail the broader tightening trajectory. With core inflation still above target and wage dynamics supportive, the BOJ is likely to proceed cautiously. A pause seems likely at the next meeting, on January 22–23, 2026. Market impact: yen, JGBs, Nikkei:Yen: The downside CPI surprise may cap near-term yen gains, especially if US yields remain elevated, but persistent above-target inflation limits scope for sustained depreciation.JGBs: Front-end yields may consolidate after the recent sell-off, though the medium-term bias remains toward higher yields as policy normalisation continues.Nikkei: Equities may welcome reduced near-term tightening pressure, particularly rate-sensitive sectors, while exporters remain sensitive to yen swings. This article was written by Eamonn Sheridan at investinglive.com. 🔗 Source 💡 DMK Insight Tokyo’s core CPI slowing to 2.3% is a mixed bag for traders: On one hand, the drop from 2.8% suggests easing inflationary pressures, which could influence the Bank of Japan’s (BOJ) monetary policy. If the BOJ perceives that inflation is stabilizing, they might delay any interest rate hikes, keeping the yen weaker in the short term. This could be a signal for forex traders to consider short positions on JPY against stronger currencies like USD or EUR. On the flip side, core-core CPI remains above the BOJ’s 2% target, indicating that demand-side pressures are still in play. This could lead to volatility in Japanese equities as investors weigh the potential for future rate adjustments. Traders should keep an eye on the upcoming BOJ meetings and any comments from officials regarding inflation targets. Key levels to watch include the USD/JPY pair; if it breaks above recent highs, it could indicate a stronger dollar amid a dovish BOJ stance. Conversely, if inflation continues to surprise on the upside, we might see a shift in sentiment that could strengthen the yen. 📮 Takeaway Watch the USD/JPY pair closely; a break above recent highs could signal a stronger dollar as the BOJ maintains a dovish stance.

Japan Tokyo CPI ex Fresh Food (YoY) came in at 2.3% below forecasts (2.5%) in December 🔗 Source 💡 DMK Insight Japan’s CPI miss at 2.3% could signal a shift in monetary policy expectations. For traders, this lower-than-expected inflation reading might prompt the Bank of Japan to reconsider its current stance on interest rates. If inflation continues to lag behind forecasts, we could see a more dovish approach from the BOJ, which would impact the yen and Japanese equities. Traders should watch the USD/JPY pair closely; a sustained move above key resistance levels could indicate a shift in sentiment towards the dollar as a safe haven. Additionally, this CPI data could ripple through global markets, affecting commodities and risk assets as investors reassess their positions. But here’s the flip side: if inflation rebounds in the coming months, the BOJ might stick to its current policies, leading to volatility in the yen. Keep an eye on the next inflation report and any BOJ commentary for clues on future direction. The immediate takeaway is to monitor the USD/JPY for potential breakout levels, especially if it approaches 140, which could trigger further dollar strength. 📮 Takeaway Watch the USD/JPY closely; a breakout above 140 could signal a shift in dollar strength amid BOJ policy changes.

Japan Jobs / Applicants Ratio meets expectations (1.18) in November 🔗 Source 💡 DMK Insight Japan’s jobs-to-applicants ratio hitting 1.18 is a key indicator for traders: This figure, meeting expectations, suggests a stable labor market, which can influence the Bank of Japan’s monetary policy decisions. A strong job market typically leads to increased consumer spending, potentially boosting the Japanese economy. For forex traders, this could mean a stronger yen against currencies like the USD, especially if the BOJ signals a shift towards tightening. Keep an eye on the USD/JPY pair; if it breaks below recent support levels, it could indicate a bearish trend for the dollar. On the flip side, if the ratio had significantly exceeded expectations, it might have raised concerns about inflationary pressures, prompting a more aggressive stance from the BOJ. As it stands, the current data suggests a wait-and-see approach. Watch for upcoming economic indicators, particularly wage growth and inflation data, which could further impact the yen’s strength in the coming weeks. 📮 Takeaway Monitor the USD/JPY pair closely; a break below support could signal a bearish trend for the dollar as Japan’s job market remains stable.

Japan Tokyo Consumer Price Index (YoY) dipped from previous 2.7% to 2% in December 🔗 Source 💡 DMK Insight Japan’s CPI drop to 2% is a big deal for traders: it signals potential shifts in monetary policy. A lower inflation rate could lead the Bank of Japan to reconsider its ultra-loose monetary stance, which has been a cornerstone of its economic strategy. If the trend continues, we might see a stronger yen as interest rates could rise, impacting forex traders significantly. Watch for how this CPI data influences USD/JPY and other pairs. The market’s reaction could also ripple into equities, especially those tied to consumer spending. Keep an eye on the 2% level—if inflation stabilizes around here, it could set the stage for a more hawkish BOJ stance. But here’s the flip side: if inflation remains subdued, it could signal underlying economic weakness, which might keep the BOJ on the sidelines longer than expected. Traders should monitor upcoming economic indicators closely, especially any shifts in consumer sentiment or spending that could provide further context to this CPI reading. 📮 Takeaway Watch the 2% CPI level closely; a sustained dip could prompt the BOJ to shift its monetary policy, impacting the yen and related forex pairs.

Japan Tokyo CPI ex Food, Energy (YoY) dipped from previous 2.8% to 2.3% in December 🔗 Source 💡 DMK Insight Japan’s CPI drop to 2.3% from 2.8% is a big deal for traders: This decline signals a potential easing of inflationary pressures, which could influence the Bank of Japan’s monetary policy. If inflation continues to cool, we might see a shift in interest rates, impacting the yen and related forex pairs. Traders should keep an eye on the USD/JPY, especially if it approaches key support levels around 130.00. A sustained move below this level could indicate further weakness in the yen, prompting a reevaluation of long positions. But here’s the flip side: if inflation rebounds unexpectedly, it could lead to a hawkish shift from the BOJ, catching traders off guard. Watch for upcoming economic indicators and central bank statements that could provide clarity. The next few weeks will be crucial for gauging market sentiment and positioning ahead of potential volatility. 📮 Takeaway Monitor the USD/JPY closely; a drop below 130.00 could signal further yen weakness, while inflation surprises could shift BOJ policy unexpectedly.

Japan Unemployment Rate meets forecasts (2.6%) in November 🔗 Source 💡 DMK Insight Japan’s unemployment rate holding steady at 2.6% is a mixed bag for traders: On one hand, this stability suggests a resilient labor market, which could support consumer spending and economic growth. For forex traders, the yen might see some bullish sentiment if this data leads to speculation about potential monetary policy adjustments from the Bank of Japan. However, with inflation still a concern, the central bank’s next moves will be crucial. But here’s the flip side: if the unemployment rate remains unchanged while inflation pressures persist, it could signal underlying economic weaknesses that might not be immediately visible. Traders should keep an eye on related economic indicators, like wage growth and consumer confidence, which could provide a fuller picture. Watch for any shifts in the USD/JPY pair, especially around key technical levels, as these data points could influence market sentiment significantly in the coming weeks. 📮 Takeaway Monitor the USD/JPY pair closely; any shifts in monetary policy speculation could lead to volatility around the 2.6% unemployment rate.

Japan Industrial Production (MoM) below forecasts (-2%) in November: Actual (-2.6%) 🔗 Source 💡 DMK Insight Japan’s industrial production dropping 2.6% is a red flag for traders: This miss against forecasts signals potential weakness in the economy, which could ripple through global markets. A decline in industrial output often hints at reduced demand, affecting everything from commodities to currency pairs linked to Japan. For forex traders, this could mean a bearish outlook for the yen, especially if the trend continues. Watch for how this impacts the USD/JPY pair, particularly if it breaks below key support levels. On the flip side, some might argue that this could lead to more stimulus measures from the Bank of Japan, potentially creating a short-term buying opportunity. However, the immediate sentiment is likely to lean bearish as traders digest this data. Keep an eye on upcoming economic indicators, as further declines could solidify a bearish trend in Japanese assets. 📮 Takeaway Monitor the USD/JPY pair closely; a break below recent support levels could signal further yen weakness amid declining industrial production.