Japan wholesale inflation holds steady, yen fall adds to BoJ pressure

Japan's wholesale inflation held steady in September and most households expect prices to keep rising a year from now, data showed on Friday, an indication price pressures could keep the central bank on course to raise interest rates.

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The yen’s recent sharp falls, triggered by receding market bets of a near-term rate hike by the Bank of Japan, could also drive up inflation by causing a renewed increase in import costs, some analysts say.

Persistent inflation would add to headaches for Japan's new ruling party chief Sanae Takaichi, who has pledged to curb rising living costs upon becoming next prime minister.

“We're starting to see a negative cycle in which the BOJ's slow pace of rate hikes is depreciating the yen and pushing up the cost of living,” said Izuru Kato, chief economist at Totan Research.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 2.7% in the year to September, steady from August and exceeding market forecasts for a 2.5% per cent increase.

“We expect wholesale inflation to stay above 2 per cent for the time being” with prices continuing to rise for food and energy, said Yutaro Suzuki, an economist at Daiwa Securities.

A survey released on Friday showed 88 per cent of households expect prices to rise a year from now, up from 85.1 per cent three months ago, suggesting the rising cost of living was heightening public perceptions that price rises will continue.