Japan’s wholesale inflation remained elevated in July, strengthening expectations that the Bank of Japan could raise interest rates as early as September amid persistent price pressures
Japan’s annual wholesale inflation remained elevated in July, highlighting persistent price pressures and strengthening market expectations that the Bank of Japan (BOJ) could raise interest rates as early as September.
The producer price index rose 7.2 per cent in July from a year earlier, BOJ data showed on Thursday. The increase followed a revised 7.3 per cent rise in June, but was below the 7.4 per cent increase expected by economists.
On a month-on-month basis, the index rose 0.1 per cent in July, slowing from a revised 0.5 per cent increase in June.
The data come as the BOJ has adopted a more hawkish tone on inflation risks. At its July meeting, some policymakers argued for accelerating the pace of interest rate increases as price pressures remained elevated.
The central bank kept its policy rate unchanged last month but warned that underlying inflation could exceed its target. It also said future discussions would focus on upside risks to prices, raising the possibility of a rate hike at its September meeting.
Import costs also remained a major source of pressure. The yen-based import price index rose 29.1 per cent in July from a year earlier, easing from a revised 30.1 per cent increase in June.
More from BusinessThe figures suggest that the yen’s weakness continues to push up the cost of imported goods and feed into broader price pressures in the Japanese economy.
The BOJ has been gradually moving away from its long-standing ultra-loose monetary policy as inflation becomes more persistent. A September rate hike would reinforce the central bank’s shift towards policy normalisation.
