Japan's Wholesale Inflation Spikes Again, Rate Hike Odds Rise

Japan's wholesale inflation remained high in July, rising to 7.2% from the previous year, according to data released by the Bank of Japan (BOJ). This marked a slower pace than market forecasts, but still stayed near the 7.3% spike seen in June.

The producer price index edged up 0.1% on a month-on-month basis in July, after a revised 0.5% increase in June. Strong demand tied to the AI boom and elevated global metal prices continued to drive price gains across a broad range of goods.

Nonferrous metals prices surged 40.6% year-on-year in July, while the price of chemical products rose 12.9%. The yen-based import price index also rose 29.1% from a year earlier, highlighting the impact of the currency's weakness on import costs and broader inflation.

Analysts expect the BOJ to raise interest rates in September, with some predicting a move to 1.25% from 1%. This would be in line with recent hawkish communication from the BOJ and growing concerns over the weak yen's impact on households and retailers.