Japan’s June services PPI rises 3.2% year-on-year, aligning with forecasts and down from 3.3%

    by VT Markets
    /
    Jul 25, 2025
    Japan’s Services Producer Price Index (PPI) for June went up by 3.2% compared to last year, matching predictions. This is a slight drop from May’s rate of 3.3%. Other economic indicators show that both headline and core inflation rates in Tokyo for July remain above the target range. The Tokyo headline Consumer Price Index (CPI) was at 2.9%, slightly below the expected 3%.

    Corporate Services Price Index

    This information comes from the Corporate Services Price Index (CSPI), released by the Bank of Japan. The data on corporate service prices and the latest numbers from Tokyo suggest that inflation is becoming more established in Japan’s economy. These ongoing price pressures mean that the central bank may need to end its very loose monetary policy sooner than expected. This signals that a major policy change may be on the way. National core inflation has now been above the official 2% target for 25 months, a streak not seen in decades. In July 2023, a surprise policy change that allowed bond yields to rise led to a quick strengthening of the yen. This past reaction helps us predict how the market may respond to any future tightening.

    Market Strategy and Predictions

    Looking ahead, we think traders should prepare for a stronger Japanese yen. One way to do this is by buying call options on the JPY, which allows for upside potential against the U.S. dollar while limiting risk. Recently, one-month implied volatility for the yen went over 10% before policy meetings, indicating that the market is ready for a significant shift. Traders should also pay attention to the government bond market, where the Yield Curve Control policy is facing strong pressure. We expect that policymakers may change the yield cap again or drop the policy entirely, which would lead to falling bond prices. One straightforward way to bet on this is by shorting Japanese Government Bond (JGB) futures. Governor Ueda has repeatedly mentioned that sustainable wage growth is essential for any policy change. This year’s “shunto” spring wage negotiations resulted in average pay raises of 5.28%, the largest increase in over 30 years, which seems to meet his criteria. This development strongly supports the case for policy normalization in the coming weeks. Create your live VT Markets account and start trading now.

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