Tokyo's December inflation cooled to 2% from 2.7% in November, easing concerns about price pressures in Japan's capital.
The decline came ahead of the Bank of Japan's late-January policy meeting.
The BoJ raised rates to 0.75% last week, the highest level in roughly three decades.
Despite the inflation slowdown, the central bank signaled additional rate increases remain likely if economic conditions support further tightening.
What Happened
Tokyo's core consumer price index, excluding fresh food, rose 2.3% year-over-year in December.
This marked a decline from 2.8% in November and fell below economist expectations of 2.5%.
The moderation was driven primarily by lower utility costs and slower food price increases.
All three inflation gauges remain above the BoJ's 2% target, suggesting underlying price pressures persist despite the slowdown.
The Federal Reserve cut interest rates three times in the second half of 2025, bringing the cumulative reduction since September 2024 to 1.75 percentage points.
Markets now price two additional cuts in 2026.
Yet precious metals, not cryptocurrency, captured investor attention throughout 2025.
Gold surged more than 70% to break above $4,500 per ounce, marking its strongest annual performance since the late 1970s.
Silver climbed approximately 150% to reach record highs above $72 per ounce.
Platinum rallied over 150%, posting its largest annual advance since at least 1987.
Bitcoin's (BTC) Coinbase Premium Index hit a month-low, suggesting weakening U.S. institutional demand despite the macro backdrop that historically favored digital assets.
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Why It Matters
The divergence between precious metals and cryptocurrency performance in 2025 challenges assumptions about digital asset demand during periods of monetary easing and inflation concerns.
Traditional safe-haven assets dominated investor portfolios despite three consecutive Fed rate cuts.
Gold, silver and platinum attracted capital that might have flowed toward Bitcoin during previous market cycles.
The shift reflects evolving investor preferences in an environment of persistent economic uncertainty.
Geopolitical tensions, currency debasement concerns and industrial demand for metals created conditions favorable for traditional commodities.
Bitcoin's "hedge" narrative lost momentum as investors demonstrated preference for tangible assets with established industrial applications.
The metals rally included both monetary and industrial drivers.
Silver benefited from surging demand in solar panel manufacturing and electronics production.
Platinum gained from supply constraints in South Africa and shifting automotive catalyst requirements.
Japan's cooling inflation may provide limited support for risk assets.
The BoJ's commitment to further rate increases suggests monetary conditions in Japan will continue tightening.
Rising Japanese rates typically strengthen the yen, which can pressure dollar-denominated assets including cryptocurrency.
U.S. investors showed reduced risk appetite throughout 2025 despite accommodative Fed policy.
The preference for metals over digital assets indicates skepticism about cryptocurrency's role during economic uncertainty.
Bitcoin proponents argue the asset requires longer timeframes to demonstrate correlation with monetary policy changes.
Critics note the sustained metals rally suggests investors seeking inflation hedges found more attractive alternatives.
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