Japan's CPI base-year revision may raise first-half 2026 inflation but lower the subsequent inflation path

Overview

This report discusses the impact of Japan's 2025 CPI base-year revision on published inflation data and future inflation forecasts. Japan's statistics authorities plan to release the base-year revision on August 7 and retrospectively recalculate CPI for January-June 2026, which was estimated under the current 2020 base year. Inflation rates through December 2025 will not be revised. Based on the 2025-base-year consumption weights released on July 10, Goldman Sachs believes core CPI and core-core CPI are likely to be revised modestly upward.

Core views

The core view is that inflation rates for January-June 2026 may be revised upward in the short term due to weighting changes, while the new 2025 base-year weights may lower the future inflation path over the medium term. Upward factors include lower weights for education and childcare-related items, reducing the negative contribution from free-of-charge policies, and an increase in the rice-price weight from 0.62% to 1.01%, amplifying the contribution of rising rice prices to CPI from 2025 through early 2026. Downward factors mainly include a larger negative contribution from future declines in rice prices under the higher weight, as well as a decrease in the mobile-phone weight from 0.90% to 0.58%, which may weaken the positive contribution of potential future price increases to CPI.

Analysis framework

The report uses a CPI-component weighting reassessment framework, comparing the weights of major components under the 2020 and 2025 base years and estimating the retrospective changes in core CPI and core-core CPI for January-June 2026. The analysis focuses not on forecasting the trajectory of any single price, but on how changes in weights alter the contribution of each component's prices to overall inflation.

Methodology notes

• Macroeconomic inflation accountingCPI base-year revision and weighting-contribution analysis

  Recalculating CPI component contributions using the new consumption-basket weights

  CPI is calculated as a weighted average of the price indexes of multiple items based on consumption weights. A base-year revision updates the average consumption structure, meaning that the same change in a component's price can make a different contribution to overall inflation under the new weights.

• Scenario estimationComparison of the 2020 and 2025 base years

  Comparing core and core-core CPI inflation rates under the current and new base years

  Based on the published 2025-base-year consumption weights, Goldman Sachs makes a rough estimate of core CPI and core-core CPI for January-June 2026. However, uncertainty remains because the estimation methodologies for some price indexes will also change.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Japan CPI

  Directly affected asset

  Strengths

  The new base year more closely reflects the 2025 consumption structure and may improve the representativeness of the current consumption basket.

  Weaknesses

  The simultaneous changes to some price-index estimation methodologies create uncertainty in weight-based estimates.

  Comparison

  Compared with the 2020 base year, the 2025 base year raises the rice-price weight while lowering the weights of certain items such as education, childcare, and mobile phones.

  Risks

  The final official revision may differ from Goldman Sachs' rough estimate.

• Japanese inflation expectations

  Indirectly affected

  Strengths

  The upward revision to historical data may temporarily reinforce perceptions of inflation persistence.

  Weaknesses

  Falling rice prices under the higher weight will increase downward pressure on future inflation.

  Comparison

  Retrospective short-term data are biased upward, while the medium-term forecast path is biased downward.

  Risks

  If rice prices, mobile-phone prices, or energy prices develop differently from expectations, the direction of the inflation impact may change.

Key data

• CPI base-year revision release date2026-08-07CPI for January-June 2026 will be retrospectively revised at that time; data through December 2025 will not be revised.
• CPI base-year revision frequencyOnce every five yearsThis revision switches from the 2020 base year to the 2025 base year and updates the average consumption pattern.
• Change in rice-price weightIncreased from 0.62% to 1.01%The higher weight will amplify the contribution of rice-price changes to inflation; it may significantly raise revised inflation in the first quarter of 2026 and will also amplify the negative contribution from future declines in rice prices.
• Change in mobile-phone weightDecreased from 0.90% to 0.58%If mobile-phone prices rise from the second half of the year through the first half of next year, the lower weight may weaken their positive contribution to CPI.
• Affected inflation indicatorsCore CPI and core-core CPIThe report expects both to be modestly revised upward for January-June 2026.

Impact & implications

For investors, the base-year revision may send two opposing signals. In terms of historical data, first-half 2026 inflation readings may be revised upward, particularly in the first quarter. In terms of forecasts, however, the new weights may put downward pressure on the future inflation path. This change will affect market interpretations of the persistence of Japanese inflation, the monetary-policy path, and interest-rate expectations, although the report itself does not provide specific trading recommendations.

Risks

• The estimation methodologies for some price indexes will be adjusted as part of the base-year revision, so the final official data may deviate from the current rough estimates based on weights.
• Rice-price trends are a key uncertainty. The higher weight may amplify both the earlier positive contribution from rising prices and the future negative contribution from falling prices.
• If mobile-phone prices rise at a pace different from expectations, the assessment of their inflation contribution under the new weights may change.
• The report does not provide complete chart data, and some exhibit content consists only of titles, limiting quantitative verification of the specific revision magnitude.

What to watch

• The official release of Japan's 2025 CPI base-year revision results on August 7.
• The actual upward revision magnitude for core CPI and core-core CPI for January-June 2026.
• Changes in rice prices' contribution in the remaining months of 2026.
• Mobile-phone price increases from the second half of 2026 through the first half of 2027.
• Whether Goldman Sachs adjusts its FY2026-2027 Japan inflation forecast as a result.