Japan’s wholesale inflation soared in June, reaching a record high for the seventh consecutive month, driven by a weakening yen and rising import costs. The corporate goods price index (CGPI), which measures prices companies charge each other for goods and services, jumped 2.9% year-on-year, aligning with market forecasts.
The yen’s depreciation significantly impacted inflation, pushing yen-based import prices up by 9.5% year-on-year in June, marking the fastest rise since February 2023. The weakening currency inflated the cost of imported raw materials, further contributing to the surge in wholesale prices.
Global commodity price increases and the phasing out of fuel subsidies also contributed to the inflationary pressure. The Bank of Japan (BOJ) will closely scrutinize this data at its upcoming policy meeting on July 30-31, where it will assess the need for raising interest rates from their current near-zero levels.
The data highlights the increasing inflationary pressures in Japan, prompting concerns for the BOJ as it strives to achieve its 2% inflation target. The weak yen remains a key driver of inflation, with economists predicting continued upward pressure on import prices. The BOJ is expected to consider the impact of the yen on inflation and may consider taking “monetary policy action” if its movements significantly affect inflation. A near-term interest rate hike is increasingly likely as the data strengthens market expectations for the BOJ to combat rising inflation.