Japan's July PPI rose 7.2% year on year, while small-business bankruptcies reached a record high amid persistently elevated inflation. Markets are increasingly expecting the BOJ to raise rates in September.
The producer price index (PPI) rose 7.2% year on year in July, just below the revised 7.3% figure for June. The increase was driven by three categories: petroleum and coal products, chemicals, and nonferrous metals. The BOJ said the main factors behind the sharp rise were the situation in the Middle East and expanding demand related to AI. The yen's depreciation and wage pressures remain moderate, and the BOJ continues to cite them as grounds for maintaining its rate-hike path.
Meanwhile, bankruptcies are increasing as companies struggle to pass higher costs on to customers. According to data compiled by Teikoku Databank, 556 companies went bankrupt in the first half of this year after failing to pass input costs such as fuel and raw materials on to customers, the highest figure for the period since statistics began in 2018. July bankruptcies totaled 121, the highest monthly figure on record.
The yen-denominated import price index remained elevated, rising 29.1% year on year, as the weaker yen amplified import costs. The effect of intervention is expected to be limited going forward, and exchange-rate movements continue to intensify cost pressures on companies.
Markets are increasingly expecting the BOJ to raise rates in September, with Governor Ueda Kazuo (植田和男) hinting at the possibility of a rate hike. The July policy meeting showed signs of accelerating discussion over how to address inflation risks, and the timing and pace of a rate hike are drawing attention ahead of the September meeting.