Japan’s Producer Price Gains Quicken, Keeping BOJ on Hike Path #JapanFinance

(Bloomberg) — The pace of gains in Japan’s corporate goods prices accelerated last month to the fastest clip in 19 months, keeping the Bank of Japan on track for further interest rate hikes.

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The measure of input prices for Japanese firms rose 4.2% in January from a year earlier, the BOJ reported Thursday. The gain, led by agricultural products such as rice, was bigger than the consensus estimate of 4% and compared with a revised 3.9% advance a month earlier.

The data are likely to support growing market views that the BOJ’s current policy cycle could feature hikes that are faster and culminate in a higher terminal rate than many previously expected. The shift in thinking has helped spur repricing in the bond market. Japan’s 10-year bond yields continued to rise Thursday, hitting the highest level almost in 15 years.

The BOJ raised its benchmark rate to the highest level in 17 years last month as inflation and the economy continued to perform in line with the expectations of authorities.

In a Bloomberg survey conducted following the January policy gathering, more than half of BOJ watchers said they expect the next hike to come in July. In their risk scenarios, 45% said the action could be taken as early as the board meeting that concludes on May 1.

BOJ Governor Kazuo Ueda said earlier this week that he will continue to carefully monitor inflation as it’s possible that recent gains in food prices will be sustained.

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