Japan’s wholesale inflation accelerated in June at the fastest pace in more than three years.
The producer price index increased 7.1 percent in June from a year earlier, data showed on Friday.
The data came in the wake of the Bank of Japan (BOJ) saying on Thursday that the U.S.–Israeli war on Iran is likely to prod more firms to raise prices later this year.
“The risk of exports and output falling sharply is receding as companies make progress re-routing shipments and finding alternative sourcing to deal with supply disruptions caused by the Middle East conflict,” the BOJ report said.
The inflation spike was driven by a 22.8 percent rise in fuel prices and a 39.2 percent jump in non-ferrous metals prices, the data showed
Furthermore, a weak yen also continued to push up the cost of raw material imports.
The yen-based import price index in June rose 29.7 percent from a year earlier, accelerating from a revised 26.1 percent gain in May and rising at the fastest pace since October 2022.
“Wholesale inflation will remain elevated with negotiations between the U.S. and Iran hitting a roadblock. The impact of supply constraints and past rises in energy costs will also spread to prices for various goods,” Masato Koike, senior economist at Sompo Institute Plus, said on July 10.
“If prices rise sharply for various goods, the BOJ may be forced to raise rates early, including in October.”
The data will be among the factors the BOJ will scrutinize at this month’s policy meeting.
Seeking to dispel concerns that the Takaichi administration may interfere with monetary policy, Economy Minister Minoru Kiuchi said the government will make tweaks to the draft’s language, including those related to monetary policy.
“There’s no change to the government’s stance that specific monetary policy means are left for the BOJ to decide,” Kiuchi told a news conference on Friday.
“The government will never convey in advance its views to the BOJ about the timing and range of rate hikes or cuts, or the direction of monetary policy.”
Finance Minister Satsuki Katayama also told a separate news briefing that respecting central bank independence was “very important to maintain market trust” in government policy.
In raising its policy rate to a 31-year high of 1 percent last month, the BOJ warned of mounting inflationary pressure from the Iran war, citing steady rises in wholesale inflation.
Most analysts polled by Reuters expect the BOJ to raise rates again to 1.25 percent by year-end.
A S&P Global survey data published on July 3 said that cost pressures picked up across Japan’s private sector, with input costs rising at the sharpest pace in four years.
“Prices charged inflation meanwhile eased from May’s record high, but remained rapid overall,” it added.
