July's corporate price index stood at a high 7.2% year on year. As yen depreciation pushes up import prices and expectations for an additional BoJ rate hike grow, USD/JPY is approaching ¥160.
Japan's domestic corporate price index rose 0.1% month on month in July and was up 7.2% year on year. Price pressures in transactions between companies remain elevated, and the impact of import costs warrants attention.
Import prices rose sharply by 1.3% month on month and 29.1% year on year in yen terms. On a contract-currency basis, they rose 0.3% month on month and 17.7% year on year, indicating that yen depreciation is driving up import prices when translated into yen.
The BoJ is alert to the risk that higher import prices will feed through to domestic prices, and markets are increasingly focused on the prospect of a rate hike in light of yen depreciation and price trends. Uncertainty over the pace of rate hikes remains.
After plunging temporarily from the high ¥163 range in July to the ¥155 range, USD/JPY rebounded to the ¥159 range, bringing ¥160 back into focus. Low real interest rates are also affecting the yen's performance.