Japan's headline inflation fell to 1.3% in February, marking its lowest level since March 2022 and missing the Bank of Japan's 2% target for the fourth consecutive month. Core inflation moderated to 1.6%, below analyst expectations of 1.7%, while core-core inflation declined to 2.5%. The slowdown was primarily driven by government energy subsidies and price controls on utilities, with electricity and gas prices falling 8% and 5.1% respectively. Despite the weak headline numbers, economists warn that underlying inflationary pressures remain more persistent than the data suggests. The Nikkei 225 rose over 2% following the release, while BOJ Governor Kazuo Ueda indicated that a proposed food tax suspension would have limited impact on medium and long-term inflation expectations.
