Producer price growth cools, easing urgency for further Bank of Japan hikes

The growth of corporate goods prices in Japan has eased again while staying at elevated levels, indicating that inflationary pressure from input costs may have peaked for now and suggesting less urgency for the Bank of Japan to raise interest rates after last month’s hike.

The measure of input prices for Japanese firms climbed 6.8% in September from a year earlier, slowing from 7.6% in the previous month, the BOJ reported Tuesday. It was the sharpest slowdown since May 2025. The Producer Price Index (PPI) gauge fell 0.3% from the previous month, the same result as in August.

The figures indicate there’s little need for the BOJ to follow last month’s rate increase with a back-to-back move when the board next sets policy on Oct. 30. Still, the gauge shows that companies remain under pressure from higher input costs and will therefore keep the bank on track for hikes. Traders widely expect another move by January, with many expecting it to come as soon as December, according to pricing in the overnight swaps market.

Costs for agriculture, forestry and fishery products dropped by 13.3% from a year earlier led by rice, which saw precipitous increases in the spring of 2025. Gains in petroleum and coal products decelerated to 11.5%, affected by the government’s subsidies, according to the report.

The PPI has shown that many businesses are willing to pass on higher costs stemming from the Middle East conflict to customers, as inflation expectations are taking root.

In the BOJ’s quarterly tankan survey released earlier this month, longer-term inflation expectations among businesses ticked down to 2.5% from a record high of 2.6%.