Japan’s wholesale price index rose 6.8% year on year in September, slowing from a 7.6% increase in August. Expectations for a Bank of Japan rate hike remain in place.
Japan’s wholesale price index, released by the Bank of Japan for September, rose 6.8% year on year, slowing from a 7.6% increase in August. On a month-on-month basis, it fell 0.3%, remaining in negative territory for a second straight month.
Factors behind the slowdown included lower import raw-material costs as the yen strengthened and falling crude oil prices as supply from the Middle East recovered, indicating that commodity-driven inflationary pressure eased somewhat. The yen-based import price index remained elevated, rising 24.5% year on year, although this was slower than the 25.1% increase in August.
Wholesale prices nevertheless remain elevated, and the data is unlikely to significantly reduce expectations for further tightening by the Bank of Japan. The BOJ has already implemented a cumulative 50-basis-point rate hike this year.
The September data will be a key factor affecting the formulation of new outlooks at the Monetary Policy Meeting later this month. Analysts point out that elevated commodity prices and a weaker yen are pushing up producer prices, and that cost pass-through to consumer prices remains under way.
The focus in the market is on the BOJ’s next move, while the persistence of elevated wholesale prices suggests that inflationary pressure has not completely disappeared. The BOJ’s interest-rate decision could also affect global markets.