BOJ Rate Hike Looms as Japan's Wholesale Inflation Stays Hot

Japan's wholesale inflation continued to rise in August, keeping the Bank of Japan (BOJ) on track for a possible rate hike at its upcoming policy meeting. The producer price index, which measures the prices firms charge each other, rose 7.6% from a year earlier, slightly above forecasts.

Despite a 0.2% dip in prices from July, the yen-based import price index was still up 24.8% year-on-year, showing how a weak currency can make imported goods more expensive and keep inflation sticky. This data is crucial for Governor Kazuo Ueda as it indicates that companies can continue to pass on higher costs to households, making inflation harder to control.

The BOJ lifted its policy rate to 1% in June and held it steady in July while signaling a possible move soon. Markets are now pricing in a step to 1.25% next week, with analysts polled by Reuters expecting rates to climb to 1.75% by the second quarter of 2027.