Inflation is easing in Japan: Tokyo CPI inflation excluding fresh food increased +1.3% YoY in May, the lowest in 4 years and the 6th consecutive monthly slowdown. The gauge has now been below the Bank of Japan’s 2% inflation target for 4 consecutive months. The Tokyo CPI is historically a strong predictor of where nationwide prices are heading. Furthermore, the Tokyo CPI excluding fresh food and energy rose +1.6% YoY, the lowest since July 2024. This was driven by slower price growth in processed foods and a steep decline in water service fees. At the same time, energy prices continued to fall, supported by government gasoline subsidies. The Bank of Japan continues to face a challenging economic backdrop.(The Kobeissi Letter)