Proof Over Theory: Japan’s November CPI Shows Inflation Is Out of Control

 

Proof Over Theory: Japan’s November CPI Shows Inflation Is Out of Control

December 21, 2025
Theme: Inflation in Japan
“Proof over theory.”
 

Japan’s latest CPI data for November leaves little room for hopeful narratives or wishful thinking. The numbers tell a simple and brutal story: inflation in Japan is no longer something policymakers can claim is “under control.” It is running ahead of them – and fiscal policy is actively pouring fuel on the fire.

Sanaenomics: Intoxicated by stimulus under 3% inflation

Under an official inflation rate of around 3%, the current administration is celebrating yet another ¥18 trillion in additional fiscal stimulus, roughly 3% of GDP. This is what I call Sanaenomics: a policy mix that mistakes short‑term adrenaline for sustainable growth, and that chooses political intoxication over macroeconomic discipline.

The problem is not stimulus per se, but timing and scale. In the midst of a high‑pressure economy, with capacity already tight and prices clearly accelerating, such a large extra package is not a safety net – it is an accelerant. Japan is not “escaping deflation”; it is drifting into an environment where inflation expectations and relative prices can become unstable.
 

In this context, it is no exaggeration to say:
Japan’s inflation is now out of control.

A “stable and persistent” overshoot of 2%

For years, the Bank of Japan insisted on the need for “stable and sustainable” 2% inflation. That condition has been met – and overshot – in a way that should alarm, not reassure, responsible policymakers.
Japan’s inflation rate has already been above 2% for 44 consecutive months since April 2022. This is not a one‑off shock or a temporary blip. It is a structurally persistent overshoot of the very target that was once presented as a distant dream.
When 2% becomes a floor rather than a ceiling, the old narrative of “finally overcoming deflation” turns hollow. The question is no longer how to reach 2%, but how to prevent an uncontrolled drift away from price stability while fiscal and political actors continue to behave as if Japan were still trapped in the 1990s.

November CPI: the acceleration beneath the surface

The November 2025 CPI data make this picture concrete.
•     Headline CPI:
Month‑on‑month +0.3%; year‑on‑year +3.7%
•     Core CPI:
Month‑on‑month +0.4%; year‑on‑year +4.9%
•     Food (excluding fresh food):
Month‑on‑month +0.5%; year‑on‑year +6.2%
•     Rice:
Month‑on‑month +1.9%; year‑on‑year +25.3%
The overall inflation rate is troubling enough. But what matters politically and socially is where prices are rising. Food prices, especially for everyday staples, cut directly into the living standards of households who do not have the luxury of “portfolio diversification” or wage‑setting power.
A 25.3% year‑on‑year increase in rice – the most symbolic and basic of Japanese food staples – is not an abstract macroeconomic statistic. It is a direct erosion of real purchasing power and a quiet redistribution of income away from vulnerable households.

 

From “escaping deflation” to ignoring reality

Despite this, the dominant political narrative still speaks the language of “supporting demand,” “escaping deflation,” and “revitalizing growth” through ever more fiscal expansion. The November CPI, however, shows that Japan is no longer in a world where demand needs to be artificially inflated at any cost.

Instead, we are in a world where:
•     Inflation has overshot and stayed high relative to the 2% benchmark.
•     Fiscal policy remains aggressively expansionary despite that overshoot.
•     Essential goods are rising faster than headline inflation, intensifying the burden on ordinary citizens.
To continue to respond with the same tools and slogans is not macroeconomic management. It is denial.

Proof over theory

For a long time, monetary and fiscal authorities could hide behind theory and expectations: “Once we reach 2%, things will normalize,” or “This is only temporary, driven by import prices.” That phase is over. The data now provide hard evidence that cannot be wished away.

•     44 months above 2%.
•     Headline inflation at 3–4%.
•     Core inflation close to 5%.
•     Food prices climbing more than 6%.
•     Rice up more than 25%.
If that does not count as a warning signal, what would?
 

The November CPI is not just another data release; it is proof that Japan’s current policy mix has crossed the line from experimental stimulation into dangerous complacency. The longer this continues, the higher the eventual cost of regaining price stability – economically, socially, and politically.