Japan’s annual wholesale inflation slowed to 2.5% in August, down from 3.0% in July, as the yen’s recovery lowered import costs. This easing inflation reduces immediate pressure on the Bank of Japan to raise interest rates, providing relief amid inflation concerns.
Yen Recovery Lowers Japan’s Wholesale Inflation, Reducing Pressure on Bank of Japan for Rate Hikes
According to data released on September 11, Japan's annual wholesale inflation declined in August due to the yen's recovery, which impacted import costs. This alleviated the central bank's obligation to address escalating price risks through near-term interest rate increases.
According to data from the Bank of Japan (BOJ), the corporate goods price index (CGPI) increased by 2.5% from the previous year in August, a decrease from the 3.0% increase observed in July. The CGPI gauges the prices that companies charge each other for their goods and services. It failed to meet the market's expectation of a 2.8% increase.
According to the data, despite a 10.8% increase in July, the yen-based import price index only increased by 2.6% in the year to August due to the steep rise in the Japanese currency during the month.
Wholesale prices decreased by 0.2% monthly in August. The import price index, which is based on the yen, decreased by 6.1% from the previous month.
BOJ’s Next Rate Hike Could Be Delayed as Slowing Wholesale Inflation Eases Pressure on Policy
The timing of the Bank of Japan's next interest rate hike may be influenced by the slowdown in wholesale inflation, which will impact the broader consumer price data in the future months.
The Bank of Japan (BOJ) discontinued negative interest rates in March and increased short-term borrowing costs to 0.25% in July, believing that Japan was making consistent progress toward the sustainable attainment of its 2% inflation target, per Reuters.
In July, the Bank of Japan (BOJ) increased rates due to the possibility of an inflation overshoot caused by rising import costs, as stated by Governor Kazuo Ueda.
He has also indicated that the BOJ is prepared to raise rates once more if consumer inflation remains on course to reach 2% in the coming years, as the board anticipates, and is accompanied by robust wage growth.


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