Japan's corporate goods prices maintained a robust upward trajectory in July, with cost pressures on businesses staying elevated. This development comes as Bank of Japan officials continue to weigh the prospect of further interest rate hikes to curb inflation.

Data released by the Bank of Japan on Thursday showed that the Corporate Goods Price Index (CGPI), which measures input costs for businesses, rose 7.2% year-on-year in July. This was slightly below the revised 7.3% increase in June, which itself marked the highest level since March 2023. On a month-on-month basis, corporate prices edged up 0.1%, following a revised 0.5% gain in the previous month.

The rise in this producer price index was primarily driven by higher prices for petroleum and coal products, chemical products, and non-ferrous metals. These figures further indicate that companies continue to face significant pressure to pass on higher costs to customers, bolstering the case for the Bank of Japan to maintain its rate hiking trajectory.

After keeping the policy rate unchanged last month, Bank of Japan Governor Kazuo Ueda stated that the next action could come as early as September, citing increased upside risks to inflation and the potential for a faster pace of rate hikes. The weakness of the yen has also pushed up the cost of imported goods and raw materials. Last month, the yen fell to a 40-year low against the US dollar. In early Tokyo trading on Thursday, the yen was trading around 159.32 against the dollar, following a partial retreat from gains achieved after coordinated intervention by Japanese and US authorities in late July to support the currency.