Japan's corporate price growth maintains a high level, adding further justification for the central bank to raise interest rates.

In July, the prices of corporate goods in Japan continued to rise at a relatively fast pace, and the cost pressures facing businesses remained high. Meanwhile, officials at the Bank of Japan are still weighing whether to further interest rate hikes to curb inflation. Data released by the Bank of Japan on Thursday showed that the corporate goods price index, which measures the cost of inputs for businesses, rose 7.2% year-on-year in July, slightly lower than the revised 7.3% in June; the latter was the highest level since March 2023. On a month-on-month basis, corporate prices increased by 0.1%, following a revised increase of 0.5% in the previous month. This rise in the producer price index was mainly driven by increases in the prices of petroleum and coal products, chemical products, and non-ferrous metals. These data further indicate that the pressure on businesses to pass on rising costs to customers remains significant, which supports the case for the Bank of Japan to continue raising interest rates. After keeping the policy interest rate unchanged last month, Bank of Japan Governor Kazuo Ueda indicated that, given the increasing risks of inflation and the potential for a faster pace of interest rate hikes, the next action could come as early as September.