Japan September PPI Slows to 6.8%, Tempering Odds of Another BOJ Rate Hike This Month

Japan’s producer-price inflation slowed in September, reinforcing expectations that the Bank of Japan will not rush to raise interest rates again this month.

Bloomberg reported on October 12 that the BOJ said its producer price index rose 6.8% in September from a year earlier. That was 0.8 percentage point lower than August’s 7.6% increase, marking the biggest slowdown since May 2025. On a month-over-month basis, the index fell 0.3%, matching the decline in August.

The slower increase in producer prices suggests some easing in companies’ raw-material procurement costs. Prices for agricultural, forestry and fishery products fell 13.3% from a year earlier, partly because of lower rice prices. The drop reflected a correction after rice prices surged last spring. Price growth for petroleum and coal products also slowed to 11.5%, helped by government subsidies.

The data have fueled views that the BOJ is unlikely to raise its benchmark rate for a second straight meeting at its October 30 policy meeting. The central bank raised rates last month, and the latest inflation figures reduced the need to rush into further tightening. Still, producer-price inflation remains high, making it difficult to say the BOJ’s rate-hike stance has ended.

Markets continue to anticipate another BOJ rate increase. Overnight index swap pricing shows investors see a strong chance of one additional hike by January next year, while many expect a move in December. With the Middle East conflict keeping pressure on energy and raw-material costs, companies are also continuing to pass those increases on through product prices.

Separately, the BOJ’s quarterly Tankan business survey released earlier this month showed companies’ long-term inflation expectations at 2.5%. That was slightly below the record 2.6% in the previous survey. Although inflation expectations have eased somewhat, they remain elevated, suggesting the BOJ’s next policy moves will depend on corporate cost pressures and the direction of prices.