BOJ Hike Odds Rise on Japan's Hot Wholesale Inflation

Japan's wholesale inflation remained elevated in July, with the producer price index rising 7.2 per cent year-over-year, according to data released by the Bank of Japan (BOJ). This is slightly lower than market forecasts for a 7.4 per cent increase but still near the 7.3 per cent spike seen in June.

The BOJ has been warning about increasing inflation risks due to strong demand tied to the AI boom, elevated global metal prices, and higher raw-material costs stemming from the Middle East conflict. These factors have driven price gains across a broad range of goods, including nonferrous metals, which surged 40.6 per cent year-over-year in July.

The yen's weakness has also contributed to higher import costs and broader inflation, with the yen-based import price index rising 29.1 per cent in July from a year earlier. This has reinforced market expectations of an interest rate hike in September, with some policymakers arguing for a faster pace of rate hikes to counter inflation risks.