Wholesale inflation in Japan slows for the fourth month in a row, influencing the Bank of Japan’s decisions
by VT Markets
/
Aug 13, 2025
Japan’s wholesale inflation has slowed down for the fourth month in a row. The July Producer Price Index (PPI), released by the Bank of Japan, showed a 0.2% increase from the previous month and a 2.6% rise compared to last year, slightly higher than the predicted 2.5%. This index tracks the prices companies charge each other for goods and services. The annual increase of 2.6% indicates a continued slowdown in wholesale inflation.
The yen-based import price index fell by 10.4% year over year, following a 12.2% drop the previous month. This decline reduces the likelihood of a short-term interest rate increase by the Bank of Japan. The USD/JPY exchange rate remains steady at about 147.77.
Japanese Stock Indices Hit New Records
Japanese stocks have been on the rise. Both major stock indices, Nikkei and Topix, have reached new record highs.
The cooling wholesale inflation reduces pressure on the Bank of Japan, suggesting that it may postpone any further interest rate hikes soon. This cautious approach makes sense, especially after the significant policy change earlier in 2024 when the Bank ended its negative interest rate policy.
For the yen, this means the gap between U.S. interest rates and Japan’s rates is likely to stay large. The Federal Reserve has kept its rates steady at 3.75% for the last two quarters, which is much higher than Japan’s policy rate. As a result, traders might place options bets on the USD/JPY pair moving toward the 150 level it briefly reached last year.
Japanese Stocks Achieve New Highs
Japanese stocks remain popular as they reach new highs. This rally first surpassed the historic 1989 peak in early 2024 and is driven by expectations of ongoing low borrowing costs. We anticipate traders will continue buying Nikkei 225 futures or selling put options to take advantage of this upward trend, with the index gaining over 15% this year.
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by VT Markets
Aug 13, 2025
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