Tokyo's April consumer price data revealed a more pronounced slowdown in the Bank of Japan's preferred core inflation gauge, slipping to 1.9% year-over-year from 2.3% in March, according to a Barclays economic update released Friday.
The core measure cited by the BOJ - which excludes perishables and energy - came in below market forecasts of 2.2%, marking a second straight month of deceleration.
Barclays highlighted a policy change as a principal driver of the softer reading. Tokyo's free childcare program for first children, which began in September 2025 and was extended into the new fiscal year, has had a direct effect on related price components. In particular, the nursery school insurance premiums index recorded a reading of 0.0, translating into a 100.0% year-over-year decline and contributing substantially to the negative side of the overall core figure.
Other line items also pulled the core measure lower in April. Overseas travel packages fell 2.1% in April after rising 5.1% in March, and cat food prices dropped 3.6% following a 23.3% increase the previous month. Entertainment costs rose 1.1% in April, a slight moderation from 1.3% in March, while food excluding perishables advanced 4.6%, down from 4.9% the prior month.
Looking beyond the BOJ's core gauge, the broader CPI excluding perishables softened to 1.5% from 1.7%, a change Barclays attributed primarily to reduced subsidies for electricity and gas bills. Meanwhile, overall CPI inflation edged up to 1.5% from 1.4%, driven by a larger contribution from perishable goods. Both of those broader readings came in below market expectations.
Barclays emphasized that the pronounced decline in the Bank of Japan's core inflation measure appears to be driven more by institutional and policy factors than by shifts in underlying demand or supply trends. That distinction was highlighted by the role of the childcare subsidy and other line-item moves in pulling the headline of the BOJ's preferred measure lower.
The data present a picture in which specific policy-driven components and volatile categories such as travel and pet food have had an outsized influence on month-to-month and year-over-year readings, while broader measures remain subdued relative to expectations.