Japan’s wholesale inflation accelerated in June due to yen declines, raising raw material import costs and rate hike expectations.
Rising global commodity costs and ending fuel subsidies raised wholesale prices, indicating increasing inflationary pressure, the data showed.
The Bank of Japan will review data at its July 30-31 meeting, considering raising near-zero interest rates and updating growth forecasts.
BOJ data showed the corporate goods price index (CGPI) rose 2.9% in June, matching the median market forecast.
It accelerated from last month’s revised 2.6% gain, hitting a record high of 122.7, the fastest pace since August 2023.
The yen-based import price index rose 9.5% in June, up from 7.1% in May, indicating inflation from the weakening currency.
The rate of increase in the index was the fastest since February 2023.
“Import prices are likely to rise further due to sustained yen declines and high energy prices,” said Yutaro Suzuki, an economist at Daiwa Securities.
“Inflation may accelerate toward autumn reflecting the impact of yen falls since the start of this year, which will be critical to the BOJ’s decision on when to hike rates,” he said.
In March, the BOJ ended negative interest rates, marking a major move towards normalizing its ultra-loose monetary policy.
BOJ Governor Ueda stated that the central bank will raise interest rates if Japan is likely to achieve its 2% inflation target.
He stated the BOJ will act on yen impact on inflation, a view echoed by Seiji Adachi in May.
Click here for more news on Finance and Investing.