Japan PPI inflation beats expectations in August, stays close to 3-½ yr high

Japanese producer inflation slowed slightly in August but remained close to its highest level in over 3-½ years as high energy costs and a weak yen factored into rising business costs.

Producer price index inflation grew 7.6% year-on-year in August, data from the Bank of Japan showed on Friday. The print was higher than expectations of 7.4% but cooled slightly from the 7.7% print seen in July, which was revised up from 7.2%.

PPI fell 0.2% month-on-month against expectations it would remain unchanged.
While Friday’s data did show a mild cooling in producer prices, it still highlighted persistent stickiness in Japanese inflation.

PPI inflation shot up this year, underpinned chiefly by high oil and gas prices due to a prolonged U.S.-Iran war. A weak yen also added to price pressures by making imports more expensive.

A steady increase in PPI has slowly factored into higher consumer price index inflation in recent months, as businesses passed on their costs to consumers.

This in turn is expected to give the BOJ more impetus to hike interest rates. The central bank recently signaled it will discuss raising rates during its September meeting, amid growing risks from high inflation.