According to the Zhītōng Finance app, Japan's wholesale inflation rate accelerated to its fastest level in over a year in October, mainly due to the depreciation of the yen pushing up the costs of some imported commodities. This trend has added complexity for the Bank of Japan when deciding when to further raise interest rates. According to data released by the Bank of Japan on Wednesday, the Corporate Goods Price Index (CGPI) rose by 3.4% year-on-year in October, exceeding the market expectations of 3.0%, showing strong momentum in prices of goods and services among enterprises.

Specifically, the index rose by 3.1% in September, achieving the fastest year-on-year growth since August 2023. The main factors driving this growth include the surge in rice prices, as well as the increase in the costs of nonferrous metals, food, and oil, all of which reflect the sustained pressure on raw material costs for enterprises.

Meanwhile, although the import price index denominated in yen declined by 2.2% year-on-year last month, the decline was narrower compared to 2.5% in September. From a month-on-month perspective, the index rose by 3.0%, a change from the 2.8% decline in September, reflecting a 4.3% appreciation of the US dollar against the yen in that month, leading to high and sustained import costs for many enterprises.

Chief Economist Nammushizu of the Agriculture and Forestry Central Treasury Research Institute pointed out that the inflationary pressure on wholesale commodity prices remains severe. Despite insufficient consumer power, wage increases are still ongoing, therefore, the possibility of a rate hike in December is increasing.

Previously, the Bank of Japan ended its negative interest rate policy in March and raised short-term rates to 0.25% in July, citing progress made by Japan in achieving the 2% inflation target.

Bank of Japan Governor Ota Kazuo emphasized that if inflation is mainly driven by strong domestic demand and wage increases rather than rising raw material costs, the central bank will be prepared to raise rates again. The rise in inflation risks due to the depreciation of the yen was also one of the key factors in the decision to raise rates to 0.25% in July.

However, despite almost 90% of economists expecting the Bank of Japan to raise rates by the end of March, a survey conducted from October 3rd to 11th showed that the vast majority of economists believe that the Bank of Japan will not raise rates again this year.

Editor/ping