The Bank of Japan (BOJ) has highlighted broadening inflationary pressures, driven by rising raw material costs and a weak yen, which are increasingly affecting consumer goods. The central bank noted that firms are raising prices more frequently than before, signaling concerns over sustained inflation. The BOJ also expressed optimism about the economic outlook, citing strong AI-related demand boosting output in sectors like electronics, machinery, and telecommunications.
In a statement following a quarterly meeting of its regional branch managers, the BOJ reported that many regions saw businesses passing on higher costs, including labor expenses and raw material prices exacerbated by the Middle East conflict. This assessment supports market expectations of another interest rate hike this year, following last month's increase to a 31-year high. The BOJ maintained that all nine regions were recovering moderately, with strong corporate spending on data centers and digitalization.
While some firms are raising prices more often, others are avoiding increases or offering discounts to attract cautious consumers. The BOJ also noted that wage gains were strong in many regions, but some firms may struggle to increase pay due to squeezed margins from rising costs. The central bank will release updated economic and inflation forecasts at its policy meeting on October 29-30, which will be closely watched for clues on future rate hikes.