Japan’s wholesale inflation remained elevated in August, with producer prices rising 7.6% from a year earlier, reinforcing expectations that the Bank of Japan (BOJ) could raise interest rates as soon as next week.
Reuters reported that based on BOJ data on Sept 11, the increase exceeded the median market forecast of 7.4%, although it eased slightly from a revised 7.7% gain in July. On a month-on-month basis, producer prices slipped 0.2% after rising a revised 0.4% in July.
Price pressures also remained strong on the import front. The yen-based import price index surged 24.8% year-on-year in August, following a revised 29.3% increase in July, highlighting the impact of a weaker yen on imported costs.
Higher fuel prices linked to the Middle East conflict have added to the inflation strain, raising concerns that companies could pass more of their rising costs on to households.
The latest data comes after increasingly hawkish signals from the BOJ, prompting markets to almost fully price in a 25-basis-point rate increase to 1.25% from 1% at next week’s policy meeting.
BOJ Governor Kazuo Ueda has said policymakers are closely monitoring wholesale inflation to assess how strongly higher corporate costs are feeding through to consumer prices.
The central bank raised its policy rate to a 31-year high of 1% in June and held it steady in July, while signalling that further tightening could follow if inflationary pressures persist.
Economists polled by Reuters expect the BOJ to lift rates to 1.25% next week and potentially to 1.75% in the second quarter of 2027, as persistent inflation and yen weakness keep pressure on policymakers to tighten further.
