Japan PPI inflation misses expectations in July but surges to 3-½ yr peak

Japanese producer price index inflation grew slightly less than expected in July, but hit its strongest levels since April 2023 as high energy prices and import costs underpinned business expenses.

PPI rose 7.2% year-on-year in July, government data showed on Thursday. The print missed expectations of 7.4% and cooled slightly from the 7.3% print in June, which was revised higher on Thursday.

PPI grew 0.1% month-on-month, missing expectations of 0.6%.
The mildly softer PPI print was fueled chiefly by cooling energy costs, as a brief ceasefire between the U.S. and Iran brought down oil prices.

But the ceasefire was seen largely collapsing by end-July, pushing crude back up towards annual highs.

Japanese producer inflation surged to multi-year highs in 2026 as energy import costs rose sharply on the Iran war. A weak yen also underpinned inflation.

This surge in producer prices is expected to eventually feed into higher consumer price index inflation in the coming months. CPI was already seen rising in recent months, despite a swathe of government subsidies to limit the spike in inflation.

Sticky inflation gives the Bank of Japan more impetus to raise interest rates.