Key facts
- Japan's wholesale prices rose 6.3% year-on-year in May, exceeding market forecasts.
- The increase was driven by higher prices for nonferrous metal, chemical, and petroleum goods.
- Wholesale prices rose 0.9% month-on-month in May.
- The yen-based index surged 25.5% in May, the fastest pace since November 2022.
- The export price index also soared 20.6% in May from a year earlier.
Japan's wholesale inflation accelerated in May, rising 6.3% year-on-year at the fastest pace in three years, driven by increased costs for nonferrous metals, chemicals, and petroleum products. This surge, exceeding market forecasts of 5.5%, was partly attributed to the closure of the Strait of Hormuz pushing up crude oil and naphtha prices. On a month-on-month basis, wholesale prices increased by 0.9%. The weakening yen also continued to fuel import price inflation, with the yen-based import price index surging 25.5% year-on-year. The export price index also saw a significant rise of 20.6%.
The data strengthens the case for the Bank of Japan to implement another interest rate hike at its upcoming meeting, with markets largely anticipating a move to 1% from the current 0.75%. Analysts suggest the central bank may accelerate its pace of policy tightening. The sustained rise in producer prices is seen as a leading indicator for consumer inflation, putting further pressure on the BOJ to manage inflationary pressures while navigating an economy reliant on imports.