Will Japan core CPI (ex-fresh food) remain above 2.0% YoY through June 2026?
The Condition
BOJ raises policy rate to 1.00% or higher by end of July 2026
Our Ensemble Estimates
Given BOJ reaches 1.00%+: Will Japan core CPI (ex-fresh food) remain above 2.0% YoY through June 2026?
Given BOJ stays below 1.00%: Will Japan core CPI (ex-fresh food) remain above 2.0% YoY through June 2026?
Causal Effect
BOJ reaching 1.00%+ worth ~18pp increase in probability of core CPI staying above 2% through June — selection effect implies supportive wage-price data, but conjunction requirement for all 4 readings is strict
Why This Matters
Tests whether inflation supports the aggressive normalization path. If the BOJ hikes to 1.00%+, it implies the board has sufficient confidence that the wage-price virtuous cycle is self-sustaining. The analysis identifies the headline/core-core divergence as critical: headline CPI fell to 1.5% (supply-side normalization) while core-core remains at 2.6% (domestic demand intact). BOJ's own FY2026 core CPI forecast of 1.9% (below target) embeds undershooting risk. A BOJ hiking to 1.00% would signal they are looking through headline weakness to the underlying demand-pull dynamic, but the real economy transmission lag of 12-18 months means the tightening impact on inflation is still in the pipeline.
Resolution Criteria
Japan Statistics Bureau CPI report shows core CPI (all items less fresh food, the BOJ's preferred measure) YoY above 2.0% for every monthly reading from March 2026 through June 2026 (4 consecutive readings). If any single monthly reading is at or below 2.0% YoY, resolves NO.
Source Analysis
Core-core CPI at 2.6% shows domestic demand-driven inflation remains intact but headline CPI fell to 1.5%; the regime is transitional between cost-push and demand-pull phases