Japan's Wholesale Inflation Rises Again, Fueling Rate Hike Expectations

Japan's wholesale inflation has remained elevated in August, according to data released on Friday by the Bank of Japan. The producer price index rose 7.6% in August from a year earlier, beating a median market forecast for a 7.4% increase. This follows a revised 7.7% gain in July and marks another month of rising inflationary pressures.

The yen-based import price index also saw a significant surge, increasing by 24.8% in August from a year earlier, after a revised 29.3% surge in July. The Bank of Japan has been closely watching wholesale inflation as a key indicator of the degree to which firms can pass on costs to households.

The central bank raised interest rates to a 31-year high of 1% in June and kept them steady in July, but signalled a strong chance of a near-term hike due to mounting price pressures. Analysts polled by Reuters expect the BOJ to hike rates to 1.25% next week and then to 1.75% in the second quarter of 2027.