① In September, Japan's corporate wholesale prices rose 6.8% year on year, while the import price index for goods priced in yen surged 24.5% compared with the same period last year; ② Sources indicate that the Bank of Japan may signal this month that it is prepared to raise interest rates again in the coming months.
On Tuesday, the Bank of Japan released its latest data showing that Japan's corporate goods price index rose 6.8% year-on-year in September. Although this increase eased compared with the previous month, inflationary pressures remain significant, and markets continue to bet that the Bank of Japan will raise interest rates in the near term.
Is a December rate hike already all but certain?
The Bank of Japan will hold its monetary policy meeting on October 29–30, during which the Policy Board will review and update its quarterly projections for economic growth and inflation. The data released this Tuesday will be one of the key indicators the Board will closely scrutinize.
The Japan Corporate Goods Price Index, released today, measures the price levels of goods and services traded among Japanese firms. The year-on-year increase of 6.8% this time fell short of the market consensus median of 7.6% and also missed the previous reading of 7.6%.
Data show that, weighed down by a sharp drop in rice prices, Japan's agricultural product prices fell 13.3% year-on-year in September; meanwhile, prices across many categories—including processed foods, electrical machinery, and telecommunications equipment—generally rose.
Meanwhile, prices for Japanese chemical products rose by 13.3%, those for plastic goods increased by 12.8%, and non‑ferrous metal products surged by 40.2%. This reflects the combined impact of the yen's depreciation, geopolitical tensions between the U.S. and Iran, and robust demand related to artificial intelligence, all of which have driven up corporate costs.
The data also show that Japan's import price index for goods, denominated in yen, surged 24.5% year-on-year in September, indicating that the continued weakening of the yen has driven up the cost of raw material imports.
Masato Koike, a senior economist at the Sompo Research Institute, stated: "The conflict in the Middle East has introduced significant uncertainty, keeping international crude oil prices elevated, and there remains a risk that wholesale inflation could accelerate further going forward."
However, he also noted that there are currently no signs of a sharp escalation in inflationary pressures, and the Bank of Japan is highly likely to keep interest rates unchanged in October, with a further rate hike not expected until December.
Interest-rate hike signals may be signaled this month.
Previously, the Bank of Japan had already raised interest rates twice, in June and September. In both of those instances, the Bank's Policy Board cited "rapid increases in wholesale prices" as one of the indicators signaling mounting inflationary pressures.
Bank of Japan Governor Kazuo Ueda has previously stated that the pace and timing of future interest-rate hikes will hinge on whether wholesale price pressures are passed on to consumer inflation, as well as on the impact of this shift on consumption.
Recent data show that Tokyo's core CPI, a leading indicator of nationwide price trends, posted its largest year-on-year increase in 10 months in September.
Sources say the Bank of Japan may signal this month that core underlying inflation has largely reached its 2% target, suggesting the central bank is poised to raise interest rates again in the coming months. Meanwhile, most analysts expect the next rate hike to occur within the year.
Editor/lambor