Japan Inflation Data Boosts BOJ Rate Hike Expectations Amid Calm US Inflation

The US inflation data for July was released and it broadly matched forecasts, causing a muted investor reaction. The calm reading did little to move investors, and together with weaker-than-expected nonfarm payroll data, reduced money market bets on a Federal Reserve interest rate hike in September.

However, the story took a different turn when Japan's wholesale inflation data was released, showing a 7.2% year-on-year increase in July. This trend indicates that inflationary pressures in the country remain persistent, driven by strong demand linked to the artificial intelligence boom and rising raw material costs amid the war in the Middle East.

As a result, expectations of a Bank of Japan rate hike are increasing, with some analysts speculating that rates could be raised as early as September. Asian stock markets were mostly higher in the morning, with South Korean stocks climbing to their highest level in three weeks due to demand for shares in chip-sector companies.