- Japan’s July producer prices rose 7.2% from a year earlier, staying at an elevated level.
- Persistent corporate cost burdens and continued upside inflation risks are strengthening the case for an additional rate hike by the Bank of Japan.
- Higher global oil prices, a weaker yen and wage growth are intensifying price pressures and contributing to a rise in corporate bankruptcies.
Forecast Trend Report by Period
Japan’s producer prices remained elevated in July, lending support to the case for another interest-rate increase by the Bank of Japan.
Bloomberg reported on Aug. 12 that the Bank of Japan’s corporate goods price index rose 7.2% in July from a year earlier. That was slightly slower than the revised 7.3% gain in June, the highest since March 2023, but still marked a strong increase. The index rose 0.1% from the previous month.
Petroleum and coal products, chemical products and non-ferrous metals led the increase.
Persistent cost pressures on companies are raising the chances that higher production costs will be passed on to consumers. That stands to influence the Bank of Japan as it weighs whether to raise rates further while watching upside inflation risks.
The Bank of Japan left its benchmark rate unchanged at 1% last month. Governor Kazuo Ueda had signaled that another rate increase could come as early as September after citing inflation risks.
Corporate bankruptcies are also climbing as some firms struggle to absorb higher costs. Teikoku Databank, a Japanese market research firm, said 556 companies went bankrupt in the first half of this year after failing to fully pass higher raw-material and fuel costs on to selling prices. That was the highest first-half total since the firm began compiling the data in 2018. There were 121 such cases last month, also a monthly record.
Higher global oil prices linked to the Middle East conflict, rising non-ferrous metal and machinery prices amid expanding global investment in artificial intelligence, and wage growth are adding to Japan’s inflation pressures.
A weaker yen is also driving up import costs. The currency fell to near 164 per dollar last month, its weakest level in 40 years, before rebounding after joint US-Japan foreign-exchange intervention. In Tokyo trading on Aug. 12, however, it was back near 159.32 per dollar.