Japan’s producer prices pick up, backing case for another BOJ rate hike

Japan’s corporate goods inflation has accelerated for the first time in three months, adding to evidence of persistent price pressures that support the case for a Bank of Japan interest rate increase next month.

The measure of prices for goods traded between Japanese firms climbed 7.1% in October from a year earlier, accelerating from 6.8% in the previous month, the Bank of Japan reported Thursday. Economists had forecast the pace of gains to ease. On a monthly basis, prices climbed 0.7%, the fastest since May.

The figures add to signs of persistent upward pressure on the cost of living as the Iran war takes a toll on the nation, which is heavily reliant on imports of oil, raw materials and food.

The BOJ acknowledged last month that underlying inflation has hit its price target, and Thursday’s data would help the central bank make the case for another rate increase when its board next sets policy on Dec. 18.

Pricing in overnight index swaps implies a 82% probability of a rate increase at that meeting. The yen traded around ¥159.62 per dollar Thursday morning in Tokyo, approaching the key threshold of ¥160, highlighting another factor that could push consumer prices higher.

October marks the start of the second half of Japan’s fiscal year, when many businesses tend to implement price changes.

The advance in the producer price index was led by oil and its related products as crude surged to levels exceeding $100 per barrel last month amid renewed concerns over the Middle East conflict.