Japan's Wholesale Inflation Stays High, Boosting Rate Hike Chances

Japan's wholesale inflation remained high in July, according to data released on Thursday. The producer price index rose 7.2% year-over-year, which is slower than market forecasts for a 7.4% increase but still near the 7.3% spike seen in June.

The BOJ kept policy steady last month but warned that underlying inflation could exceed its target on mounting price pressures, signaling a strong chance of a September rate hike. Some policymakers at the Bank of Japan argued for a faster pace of rate hikes to counter inflation risks.

Analysts predict that further yen falls will push up import prices and broaden inflation, leading the BOJ to raise interest rates in September. The rising wholesale price impulse could lead to broad-based increases in consumer inflation, which has stayed below the BOJ's 2% target in recent months due to government subsidies aimed at curbing fuel costs.

Annual core inflation in Tokyo hit 1.9% in July, accelerating from the previous month and indicating that companies are passing on rising costs to households. Concerns over the weak yen's impact on households and retailers have reinforced expectations for another rate increase.