July service prices rise 3.6%, further boosting September rate hike expectations

July service prices rise 3.6%, international freight surges 67% The Corporate Services Price Index released by the Bank of Japan on the 26th rose 3.6% year-on-year, accelerating from 3.4% in June. International ocean freight rose 67.4% to a record high due to higher costs of alternative transport avoiding the Strait of Hormuz, and the spread of wage increases and cost pass-through is strengthening expectations of an early BOJ rate hike. 123

Reuters poll: 57% now expect September rate hike, up sharply In a Reuters poll conducted August 17-24, 57% of economists expect the Bank of Japan to raise rates in September, up sharply from 5% in the July poll. Half see the terminal policy rate at 1.75%. 4

Deputy Governor Himino to speak on 27th, key to September hike Bank of Japan Deputy Governor Ryozo Himino will give a speech on the 27th. With expectations growing for a rate hike to 1.25% at the September 17-18 meeting, his remarks will be the focus for gauging the decision. 5

BOJ Governor Ueda to skip Jackson Hole; board member Tamura to attend The BOJ announced on the 26th that Governor Kazuo Ueda will not attend the Jackson Hole symposium in Wyoming. Board member Naoki Tamura will attend in his place, citing scheduling considerations rather than health issues. 67

Nikkei average up 405 yen on falling oil and laggard buying On the Tokyo stock market on the 26th, the Nikkei average extended gains, closing at 66,262.16 yen, up 405.73 yen from the previous day. A decline in U.S. crude oil futures eased inflation concerns, prompting buying in laggards such as financials and pharmaceuticals. Semiconductor stocks were mixed ahead of Nvidia's earnings. 89

U.S. 50% tariff on Canadian cars hits Japanese automakers U.S. President Trump has announced a 50% tariff on Canadian-made vehicles and parts. Toyota exports Lexus and RAV4 models from its Canadian plant, and Honda exports Civics, to the U.S. at an annual rate of around 300,000 units each, dealing a blow to Japanese automakers' supply chains. 10

Government and BOJ to build blockchain infrastructure for instant settlement of government bonds The government and the Bank of Japan are moving to build next-generation infrastructure that will enable 24-hour instant settlement of funds for government bonds and stocks. A study group to tokenize BOJ current account deposits was launched this summer, and a development plan is expected to be compiled by early 2027. 11

Government considers payments to small-scale farmers amid food tax cut The government is considering benefit payments for small-scale farmers who will see lower revenue from the consumption tax cut on food scheduled for April 2027. The aim is to prevent deterioration of their operations as a measure against reduced take-home income. 12

METI seeks average salary requirement in wage hike tax system In its tax reform requests for fiscal 2027, the Ministry of Economy, Trade and Industry is considering a plan to make average salary increases a requirement for the wage hike promotion tax system. The aim is to encourage wage increases at small and medium-sized enterprises in regional areas. 13