BOJ Rate Hike Gain Momentum Amid Inflation Concerns

The Japanese government is reportedly in favor of an earlier interest rate hike by the Bank of Japan (BOJ), according to Bloomberg. This comes as producer price index inflation data showed prices at a 3-½ year high, largely due to higher oil and gas prices.

The BOJ has warned that producer prices are likely to spill over to consumers, despite government subsidies keeping consumer price index inflation in check so far.

A September or October rate hike is in line with market consensus, which could help quash increasingly sticky domestic inflation. Hawkish moves by the BOJ may also be spurred by sustained weakness in the Japanese yen, a trend that has sparked tens of billions of dollars in currency market intervention by Tokyo this year.