Producer price gains maintain pressure on businesses as BOJ mulls rate path
The measure of input prices rose 7.2% in July from a year earlier, slightly slower than the revised 7.3% in June, the Bank of Japan reported Thursday.
Japanese corporate goods prices continued to rise rapidly in July, contributing to high cost pressures faced by companies, according to the Bank of Japan's latest report. The measure of input prices for Japanese firms increased 7.2% in July compared to a year ago, a slight deceleration from the previously revised 7.3% rise in June, marking the highest level since March 2023.
On a monthly basis, prices increased by 0.1%, following an upward revision from a 0.5% rise in the previous month. This surge in producer prices was driven by oil and coal products, chemical products, and nonferrous metals.
The data suggests that companies are still under significant pressure to pass on increased costs to customers, which could keep the Bank of Japan on track to raise interest rates. Governor Kazuo Ueda hinted that the next rate hike could occur as early as September, citing upward risks for inflation and the potential for a more aggressive pace of rate hikes.
In the first half of 2025, 556 Japanese companies went bankrupt due to their inability to pass on rising input costs to customers, a result of higher prices for fuel, raw materials, and other goods. This marked the highest number of inflation-related bankruptcies for a half-year period since records began in 2018. The trend persisted in July, with 121 cases reported, setting a record for a single month.
The latest BOJ outlook report attributed the surge in producer prices to higher oil prices following the conflict in the Middle East and rising costs for nonferrous metals and machinery due to increased global demand for artificial intelligence-related products. Additionally, the tight labor market has contributed to upward pressure on wages as businesses compete to hire and retain employees.
The weakening yen, which reached a 40-year low against the dollar last month, has also added to the upward pressure on import prices for goods and materials. The yen traded around ¥159.32 per dollar in Tokyo on Thursday morning, following a slight gain after joint currency interventions by Japan and the U.S. to support the currency at the end of July.
Written by urgent.news from Japan Times's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
