Japan’s wholesale inflation remains elevated, keeps alive BOJ rate-hike view

Published Tue, Oct 13, 2026 · 02:59 PM

[TOKYO] Japan’s wholesale prices rose 6.8 per cent in the year to September, according to data released on Tuesday (Oct 13), slowing from the previous month but highlighting mounting inflationary pressure that keeps alive market expectations of a near-term interest rate hike.

The data will be among the factors that the Bank of Japan will scrutinise when its board produces fresh quarterly growth and inflation forecasts at this month’s policy meeting.

The rise in the corporate goods price index, which measures the price companies charge each other for their goods and services, compared with the median market forecast for a 7.6 per cent increase. It slowed from a 7.6 per cent gain in August.

The yen-based import price index surged 24.5 per cent in September from a year earlier, the data released by the BOJ showed, a sign that the currency’s weakness continued to push up the cost of raw material imports.

“Wholesale inflation will likely re-accelerate given strong uncertainty over the Middle East conflict, which is keeping crude oil prices elevated,” said Masato Koike, a senior economist at Sompo Institute Plus.

“But there’s no sign of inflationary pressure accelerating sharply for the time being,” heightening the chance that the BOJ will stand pat in October and wait until December to raise interest rates again, he said.

Speaking in parliament on Tuesday, BOJ Governor Kazuo Ueda said underlying inflation “has now come quite close to 2 per cent.”

Unlike in the past, when the aim of monetary policy was to lift underlying inflation toward 2 per cent, Ueda said the economy “has entered a phase where an important policy objective is to keep it stable at around that level.”

On Tuesday, a separate BOJ survey showed that the ratio of Japanese households expecting prices to rise five years from now increased to 86.5 per cent from 86.1 per cent in the previous survey in June, suggesting inflation expectations remain firmly entrenched.

At the same time, the pace of expected inflation moderated, with households projecting prices to rise by an average of 11.8 per cent in a year’s time, down from 13.1 per cent, and by 10.1 per cent annually over the next five years, compared with 10.8 per cent in the previous survey.

BOJ eyes pass-through

A recent spike in wholesale inflation was among the factors that the BOJ cited as evidence of mounting price pressures behind its decision to raise interest rates in June and September.

While the prices of farm products fell 13.3 per cent in September from a year earlier due largely to plunging prices for rice, a broad range of other goods recorded price rises, including processed food, electric machinery and telecommunications equipment, the data showed.

Prices of chemical goods rose 13.3 per cent, plastic products increased 12.8 per cent and non-ferrous metals goods were up 40.2 per cent, a sign of the increasing cost firms were facing from the weak yen, the US-Israeli war on Iran and robust AI-related demand, the data showed.

Governor Ueda has said the key to the pace and timing of future rate hikes would be the extent to which such upward pressure on wholesale prices spreads to consumer inflation, as well as how that could affect consumption.

Recent data showed core consumer inflation in Tokyo, which is considered a leading indicator of nationwide price trends, accelerated in September at its fastest pace in 10 months.

Sources have told Reuters the BOJ may signal this month that underlying inflation has roughly hit its 2 per cent target, highlighting its readiness to raise rates again in the coming months.

The BOJ raised its key rate to a 31-year high last month, while signalling its entry into a phase focused on preventing underlying inflation from overshooting its target, raising the prospect of tighter policy.

At the meeting on Oct 29 and 30, the BOJ will release fresh quarterly growth and inflation forecasts that will be closely watched by market participants for clues to the timing of the next rate hike. Many analysts expect the central bank to raise interest rates again by the end of this year. REUTERS