Wholesale Inflation Rises in Japan Amid Global Price Pressures

Japan's wholesale inflation has continued to rise in July, with an annual increase of 7.2%, according to data released by the Bank of Japan (BOJ). This rate is slower than market forecasts but still near the 7.3% spike seen in June. The producer price index edged up 0.1% on a month-on-month basis in July.

The increase in wholesale inflation has been driven by strong demand tied to the AI boom, elevated global metal prices, and higher raw-material costs stemming from the Middle East conflict. Nonferrous metals prices surged 40.6% year-on-year in July, while chemical products rose 12.9%. The yen-based import price index also increased 29.1% in July.

The BOJ has warned that underlying inflation could exceed its target of 2%, and policymakers have argued for a faster pace of rate hikes to counter inflation risks. Analysts forecast a move to 1.25% from 1% at the next policy meeting on September 17-18, with some predicting a September rate hike.