Japan's August wholesale prices stay high, strengthening case for rate hike

Data released on Friday showed Japan's wholesale inflation remaining elevated in August, with the producer price index up 7.6% compared with the same month last year, slightly above the median market expectation of 7.4%. On a monthly basis the index fell 0.2% after a revised 0.4% increase in July. The yen-denominated import price index surged 24.8% year-on-year, following a 29.3% rise in July, indicating that a soft yen and rising fuel costs from the Middle East conflict are feeding broader price pressures.

BOJ Governor Kazuo Ueda said the bank is closely monitoring wholesale inflation for clues on firms' ability to pass on higher costs to households. The central bank lifted rates to a 31-year high of 1% in June and kept them unchanged in July, but signaled a strong likelihood of another hike soon. One outlet-polled analysts now anticipate a move to 1.25% at next week’s policy meeting and a further increase to 1.75% in early 2027.