Japan producer prices eased slightly in July to 7.2% year on year, missing analyst expectations of 7.4% and down from a revised 7.3% in June. Electricity prices were the largest contributor to the producer price index, adding 0.23 percentage point to the increase compared to June. Despite the high PPI, consumer inflation remained relatively low at 1.9% headline and 1.6% core inflation in June. This gap is largely explained by subsidies from the Takaichi administration shielding consumers from higher energy prices. At its July meeting, the Bank of Japan warned of upside risks to prices from higher oil prices, with some members calling for faster rate hikes to contain inflation.
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