Japan's wholesale inflation jumps 4.2% in January, reinforcing BOJ rate-hike bets

Japan's annual wholesale inflation jumped to 4.2% in January, accelerating for the fifth straight month, data showed on Thursday, highlighting persistent price pressures and reinforcing market bets of a near-term interest rate hike.

The data came in the wake of Bank of Japan Governor Kazuo Ueda's warning on Wednesday that continued rises in food costs could affect the public's inflation expectations, underscoring the central bank's focus on upside price risks.

The rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, exceeded a median market forecast for a 4.0% increase and followed a revised 3.9% increase in December.


Goods ranging from food, textile, plastic and non-ferrous metal saw prices rise, the data showed.

An index of yen-based import prices rose 1.5% in January from a year earlier after a revised 0.7% drop in December, the data showed, a sign the yen's weakness continued to inflate costs for companies.

The two-year Japanese government bond (JGB) yield, which is sensitive to expectations on near-term monetary policy, rose to 0.805% after the data, the highest level since October 2008.

Import prices may rise further as hot U.S. inflation data on Wednesday led to receding market expectations of near-term U.S. interest rate cuts, lifting the dollar to a one-week high against the yen. The dollar jumped 1.29% to 154.44 yen overnight and stood at 154.185 yen in Asia on Thursday.

The BOJ exited a decade-long, massive stimulus programme last year and raised short-term interest rates to 0.5% in January on the view Japan was on track to sustainably meet the bank's 2% inflation target.

The central bank has signalled readiness to raise rates further if broadening wage hikes underpin consumption and allow companies to keep hiking prices not just for goods but services.

While the BOJ targets consumer, not wholesale inflation, the rise in business-to-business prices will likely push up the price households pay for goods and services with a lag.

Japan's core consumer inflation hit 3.0% in December to mark the fastest annual pace in 16 months and staying above the BOJ's 2% target for nearly three years.