Japan's Wholesale Inflation Rises to 7.6%, Boosting Rate Hike Expectations

Japan's wholesale inflation has stayed elevated in August, highlighting mounting price pressures that strengthen the case for a rate hike by the Bank of Japan this month. The producer price index rose 7.6% in August from a year earlier, beating a median market forecast of 7.4%. This follows a revised 7.7% gain in July.

The yen-based import price index increased 24.8% in August from a year ago, after a revised 29.3% surge in July. The weakness of the yen has pushed up import costs and broader inflation. Rising fuel costs from the Middle East conflict and higher import prices have added to price pressures.

BOJ Governor Kazuo Ueda has said that the central bank is closely watching wholesale inflation for clues on the degree to which firms can pass on costs to households. 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.