Japan PPI Inflation Stays Close to 3-½ Year High

Japan's producer price index (PPI) inflation slowed slightly in August but remained close to its highest level in over three and a half years. According to data from the Bank of Japan, PPI grew 7.6% year-on-year in August, higher than expectations of 7.4%. However, this print cooled slightly from the 7.7% seen in July, which was revised up from 7.2%. The mild cooling in producer prices still highlighted persistent stickiness in Japanese inflation.

The high oil and gas prices due to a prolonged US-Iran war, as well as a weak yen making imports more expensive, have underpinned the increase in PPI this year. This has slowly factored into higher consumer price index (CPI) inflation in recent months, with businesses passing on their costs to consumers.

The steady increase in PPI is expected to give the Bank of Japan more impetus to hike interest rates. The central bank recently signaled it will discuss raising rates during its September meeting, amid growing risks from high inflation.