BOJ Faces Rate Hike Pressure Amid Elevated Wholesale Inflation
Japan's wholesale inflation remained elevated in August, with the producer price index rising 7.6% from a year earlier, according to data released by the Bank of Japan on Friday. This increase was faster than the median market forecast for a 7.4% rise.
The yen-based import price index rose 24.8% in August from a year earlier, after a revised 29.3% surge in July, indicating that the currency's weakness during the month pushed up import costs and broader inflation.
BOJ Governor Kazuo Ueda has warned of the risk of an inflation overshoot due to rising fuel costs from the Middle East conflict and higher import prices from a weak yen. The central bank raised interest rates to 1% in June, but kept them steady in July while signaling a strong chance of a near-term hike on mounting price pressures.
Analysts polled by Reuters expect the BOJ to hike rates to 1.25% next week and then to 1.75% in the second quarter of 2027 amid persistent concerns over broadening price pressures and yen weakness.