Japan's producer inflation accelerated to 7.1% in October, exceeding expectations and fueling market anticipation for a 25bps Bank of Japan rate hike to 1.50% in December.
October PPI rose to 7.1% yoy versus 6.5% expected, and yen-based import prices accelerated to 24.8%, signalling persistent cost pressure. This strengthens the case for a BoJ hike to 1.50% at the December 17-18 meeting, which is supportive for the currency. The uncertain pass-through to consumer inflation is the main counterpoint.
PPI accelerating to 7.1% yoy from 6.8%, with breadth across chemicals, utilities and steel, reinforces expectations of a 25bps BoJ hike to 1.50% on December 17-18. Rising rate expectations push Japanese government bond yields higher. Uncertain consumer pass-through could temper the move.
Japan's producer price inflation rose to 7.1% year-on-year in October, surpassing the 6.5% market forecast. The data shows broad-based cost pressures extending beyond energy into chemicals, steel, and utilities, while yen-denominated import prices climbed to 24.8%. This persistent inflation strengthens the case for the Bank of Japan to implement a 25bps rate hike to 1.50% at its December 17-18 meeting.
It makes a Bank of Japan rate increase at the December 17-18 meeting more likely, and higher Japanese interest rates tend to attract flows into the yen.
Yes, the article notes the extent of pass-through to consumer inflation remains uncertain, so the BoJ may still hold off on raising rates from 1.25%.
The hot PPI print strengthens the case for a BoJ rate hike from 1.25% to 1.50% in December, which typically lifts government bond yields.
No, the article stresses the decision will depend on the BoJ's broader assessment of underlying inflation and economic conditions.