Key facts
- Japan's wholesale inflation accelerated in June, reaching its fastest pace in over three years.
- The producer price index (PPI) rose 7.1% year-on-year in June, exceeding market forecasts.
- Key drivers included a 22.8% increase in fuel prices and a 39.2% jump in nonferrous metals.
- A weak yen contributed to a 29.7% rise in the yen-based import price index.
- The Bank of Japan is considering the data ahead of its July 31 policy meeting.
Japan's wholesale inflation surged 7.1% in June from a year earlier, marking the fastest pace in over three years and exceeding market expectations. The acceleration was driven by a significant increase in fuel prices, up 22.8%, and a 39.2% jump in nonferrous metals, reflecting global supply constraints and demand for AI-related materials. A persistently weak yen also pushed up the cost of imported raw materials, with the yen-based import price index rising 29.7%.
This elevated wholesale inflation strengthens the case for the Bank of Japan to consider further interest rate hikes. The central bank, which recently raised its policy rate to 1% in June, will scrutinize this data at its upcoming policy meeting ending July 31. Fresh forecasts released at the meeting could provide clues on the timing of the next rate increase.
Economists noted that wholesale inflation is likely to remain high due to ongoing geopolitical tensions and supply chain issues. However, consumer price inflation has risen more moderately, partly due to government subsidies aimed at cushioning the impact of higher energy costs on households. Economy Minister Minoru Kiuchi indicated that the pass-through of weak yen effects to consumer prices has a lag and is not yet substantial.