BOJ warns that rising raw material costs are spilling into consumer prices

The Bank of Japan reported that inflation is expanding as companies transmit higher raw material costs to consumer products, a shift it described as a sign of widening price pressure. The statement, issued after a quarterly gathering of regional branch managers, cited factors such as the Middle East conflict, a depreciating yen and increasing labour costs as drivers of the input-price surge. Consequently, firms are adjusting prices more frequently, with the effect now evident among businesses that sell directly to consumers.

Despite these cost pressures, the BOJ expressed optimism about the economy, noting brisk demand for AI-related technologies that is raising production of electronic goods, machinery and telecommunications infrastructure. It upgraded its economic assessment for two of Japan’s nine regions while keeping a moderate recovery view for the rest.