TOKYO — Japan's annual wholesale inflation held at 7.2 percent in July, just below the 7.3 percent reading in June, according to Bank of Japan data released Thursday — keeping pressure on the central bank to raise its policy rate next month.
The Producer Price Index rose 0.1 percent month-over-month in July, following a revised 0.5 percent gain in June. Price pressures remain broad despite earlier declines in select cost categories.
Bank of Japan communication has turned hawkish. A summary of opinions from its July policy meeting showed several policymakers calling for a faster pace of rate increases to counter inflation risks. The BOJ held policy steady last month but warned that underlying inflation could exceed its 2 percent target.
Rising crude oil prices, driven by renewed Middle East tensions, are expected to push wholesale inflation higher. Masato Koike, a senior economist at Sompo Institute Plus, said energy costs and further yen depreciation will lift import prices and feed broader inflation. Koike forecasts a September rate hike.
Strong demand tied to the artificial intelligence boom is also driving price gains in global metal markets. Nonferrous metals prices surged 40.6 percent year-on-year in July, building on a 39.3 percent increase in June. Chemical product prices rose 12.9 percent in July after a 15.1 percent gain in June.
The yen's weakness continues to push up import costs. The yen-based import price index climbed 29.1 percent in July from a year earlier, following a 30.1 percent surge in June.
The wholesale price impulse could translate into wider consumer inflation gains. Annual core inflation in Tokyo, a leading indicator for nationwide trends, reached 1.9 percent in July, accelerating from the prior month as companies pass higher costs to households — even as government subsidies have kept consumer fuel prices in check.
Concerns at the Bank of Japan over the weak yen's effect on households and retailers through higher import costs have solidified expectations for another rate increase. Analysts forecast the BOJ will raise interest rates to 1.25 percent from 1 percent at its Sept. 17-18 policy meeting.
Recent coordinated actions add weight to that call. A joint Japan-U.S. yen intervention has taken place, and U.S. Treasury Secretary Scott Bessent has signaled support for an early rate hike from Japan.
