Key facts
- Japan's wholesale prices rose 6.8% year-on-year in September.
- The yen-based import price index surged 24.5% in September.
- Farm product prices fell 13.3% in September.
- The Bank of Japan raised its key rate to a 31-year high last month.
Japan's wholesale prices rose 6.8% in the year to September, a slowdown from the previous month but still indicative of elevated inflationary pressures. This figure, released on Tuesday, keeps alive market expectations that the Bank of Japan may implement another interest rate hike in the near future.
The corporate goods price index, which tracks prices charged between companies, came in below the median market forecast of a 7.6% increase. However, the yen's weakness continued to drive up import costs, with the yen-based import price index surging 24.5% year-on-year in September.
Economists like Masato Koike of Sompo Institute Plus noted that wholesale inflation could re-accelerate due to elevated crude oil prices stemming from Middle East conflict uncertainty. However, he also stated there are no immediate signs of sharply accelerating inflationary pressure, suggesting the BOJ might hold rates in October and consider a hike in December.
The Bank of Japan has cited rising wholesale inflation as a factor in its previous interest rate increases in June and September. While prices for farm products, particularly rice, fell 13.3% year-on-year, other goods like chemical products, plastic products, and non-ferrous metals saw significant price rises, reflecting increased costs for firms due to the weak yen, geopolitical tensions, and strong AI-related demand.
BOJ Governor Kazuo Ueda has emphasized that the central bank's decisions on future rate hikes will depend on how wholesale price pressures translate into consumer inflation and impact consumption. Recent data indicated that core consumer inflation in Tokyo, a leading indicator for nationwide trends, accelerated in September to its fastest pace in ten months.
Sources suggest the BOJ may signal that underlying inflation has reached its 2% target, signaling readiness for further rate increases. The central bank previously raised its key rate to a 31-year high last month, indicating a focus on preventing inflation from overshooting its target. The BOJ will release its updated quarterly growth and inflation forecasts at its policy meeting on October 29-30, which market participants will closely watch for clues on the timing of the next rate hike, with many analysts anticipating one by year-end.